Heinz on Drooy and the Housing Bubble
Compiled by ILD
Date: Thu Sep 08 2005 12:14
trotsky (of course) ID#248269:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
with me being a fan of DROOY ( the only one left, although i seem to have picked up some not un-illustrious company lately ) who thinks the stock's potentially headed much higher, you have to take all my comments with a big grain of salt. : )
Date: Thu Sep 08 2005 12:10
trotsky (frustrated@Kupol) ID#248269:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
it has very high silver grades, and the silver by-product credits are one of the reasons production costs will be so low. if you actually calculate the dollar values of the gold and silver contained per the drill results, what you get is still a gold mine - with downright amazing grades, especially considering that its a near-surface deposit.
also, regarding the risk factors, if Bayerische Hypo and Societe Generale believe it's safe to throw $280 million at it, one can probably rest reasonably assured that they're not a major issue.
i've also seen criticism of Johnson centering on his propensity to raise equity right after releasing a set of stunning drill results, but in reality that only proves his good management sense. if you have to do financings, why on earth wouldn't you do them at the most opportune moments, while there's a reason for the stock price to be firm?
regarding GG, one must concede that Telfer has proven the skeptics wrong time and again , judging from the stock price performance and the stellar earnings results, but like RIP i have a nagging feeling that Alumbrera looks almost too good to be true , and even if those doubts are misplaced, the fact remains that copper now plays a too significant role for the company for my taste. of course copper has actually outperformed gold for a while now, but if one is in the secular gold bull camp one has good reason to be wary of too much copper exposure imo.
Date: Thu Sep 08 2005 11:31
trotsky (@homebuilder stocks) ID#248269:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
the whacking of the sector resumes after below expectations guidance by HOV. also, the major driver of the housing bubble, FNM, sees its stock drifting to fresh multi-year lows as we speak.
it appears that the bursting of the housing bubble happens in stages, similar to the demise of the tech bubble ( e.g., WCOM's stock price peaked almost two years before the stocks of its major suppliers, the telco equipment companies, peaked. many of them ended up falling well over 90% from their highs, e.g. JDSU, NT, LU, etc.etc. ) .
as soon as the government's housing statistics ( which for a variety of reasons mostly tend to be lagging indicators ) begin to show weakness , the Fed's rate hike campaign will be well and truly over.
Steve Saville opines that the market may be mistaken in assuming that the hurricane alone will be reason enough to stop the hikes - he thinks there first have to be signs of one or more major markets crying 'uncle' , both housing and stocks being major candidates. the fact that the stock market is rising already in anticipation of the rate hikes ending may actually delay the end of the campaign. not sure if this view pans out, but it's certainly worth considering.
Date: Thu Sep 08 2005 14:32
trotsky (Jessica22@DROOY) ID#248269:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
naturally, skepticism on the company always reaches a crescendo when the stock makes important intermediate term lows. i recall last time around bankruptcy rumors kept flying when it had already risen from 75 cents to $1.10 or thereabouts. i received lots of emails expressing worries about the hedge book and so on ( all well-founded of course ) . once people have completely forgotten what impressive runs it's capable of and legions have sworn off it forever, the next impressive run usually begins.
Date: Thu Sep 08 2005 14:25
trotsky (Hambone@silver) ID#248269:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
silver tends to outperform in the later stages of bull phases, due to its industrial commodity characteristics ( by the way, this industrial commodity characteristic is also why Ted Butler's comparison of the above ground silver stock with the above ground gold stock makes little sense ) . usually gold leads other commodities in bull phases, because it responds very directly to monetary easing, while the industrial commodities are usually still in downtrends in the early stages of monetary easing, but then catch up and ultimately outperform when the easing phase ends.
it doesn't always happen in exactly the same manner, but this is imo a good outline of the usual process. the exceptions occur in the blow-off stages of long term bull markets, like e.g. the '79 run in gold that took place against a backdrop of tightening ( which ultimately broke the run in the end ) .
Date: Thu Sep 08 2005 14:11
trotsky (Hambone@Kupol) ID#248269:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
"And if anyone knows what future mining costs are, please lead me to them. "
now i see what you're getting at. i don't think that should be a big problem, since any longer term price increase in the most important commodities used in mining operations will surely be matched by increases in the gold price. in fact, after the recent underperformance of gold vs. other commodities, i'd expect a period of outperformance ( i.e. the rates of return on gold mining projects should actually rise in coming years ) .
admittedly there's still an element of uncertainty, but i don't think that that is a major consideration when a feasibility study indicates such extremely low production costs. in fact, this is all the more reason to feel confident, since any statistical outliers in the evolution of mining costs will affect low cost project margins far less than high cost project margins.
Date: Thu Sep 08 2005 14:02
trotsky (Moregold@GNBT) ID#248269:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
it certainly has an interesting suite of developments in the pipeline, but it will also soon need fresh financing judging from the most recent quarterly filing.
since this filing:
yahoo.brand.edgar-online.com.
it has picked up $2 million from accredited investors, but that only covers about half of its recent quarterly cash burn rate. this is probably what has held the stock back.
Date: Thu Sep 08 2005 13:33
trotsky (frustrated@FF futures) ID#248269:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
probably in reaction to the recent service ISM ( dependent though it is on the housing bubble ) . in any event, if the hikes get priced back in, that's bad intermediate term news for the gold sector ( not only the gold sector of course ) .
still , the XAU/gold ratio is back in bullish mode after recently briefly breaking into bearish mode, so we have conflicting signals...i'd also expect the Rydex pm fund to see money rushing back in before a significant high is actually made ( recently about $35 m. have been withdrawn from the fund ) .
Date: Thu Sep 08 2005 13:14
trotsky (Bizarro@telcos) ID#248269:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
"When the telecom tower fell over,where were the bond defaults?"
there were defaults galore ( WCOM, Global Crossing, Loral, to name a few ) . the banks also had to write off billions. 98% of the glorious optical fibre networks remain unlit to this day.
lots of debt was also rescheduled or otherwise 'worked out'. also, who's to say that the last word on the remaining outstanding debt has been spoken? the recovery of the junk bond market since mid '02 only amounts to a temporary stay of execution imo, it has allowed a lot of dubious debt to stay afloat for the time being.
Date: Thu Sep 08 2005 13:00
trotsky (@MNG) ID#248269:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
check this chart:
stockcharts.com
now that's a bullish chart, no doubt about it. the big white candle in June that started it was the market response to a step out drill hole at the Madrid deposit that intersected 11.5 g. gold/ton over 66.5 metres. i mentioned back then that this was a big deal, Miramar's assorted well known problems notwithstanding. it seems the market agrees, as it has driven the stock another 30% or so higher since then. recent drilling of the already known Nartook zone at Madrid inter alia intersected 55 garms/ton over 8.3 metres, also quite impressive.
MNG's main problem is still in abeyance ( the permitting for Doris North, the deposit that is supposed to get mining at Hope Bay going ) , but somehow i don't think permission will be withheld...it all sounded more like a technicality than a fundamental disagreement over whether a mine should be built ( the people living in the general vincinity stand to profit handsomely from the development after all ) .
should the permitting go as expected, there will be nothing to hold this stock back...the drill results are mighty impressive. step-out drilling is ongoing, who knows what else they come up with. this one should definitely be on everybody's radar screen.
Nartook summary:
biz.yahoo.com
a great deal of Hope Bay remains unexplored, so there's a lot of blue sky potential still.
Date: Thu Sep 08 2005 12:42
trotsky (Hambone, 11:25) ID#248269:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
ok, so you're referencing the feasibility study. what makes you doubt its conclusions? i note that feasibility studies in general tend to be based on very conservative assumptions, and this one's no exception imo.
Date: Thu Sep 08 2005 12:39
trotsky (yellowcab, 11:16 'a little religion' ) ID#248269:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
good grief!
doesn't that make you wonder why the good Lord has left Washington DC standing?
in any event, articles such as this one are quite revealing about the thumper mindset. let's hear which alleged iniquities were punished by means of the tsunami that hit Asia last year. surely in view of the far larger death-toll there must have been truckloads of even worse sinful behavior infecting numerous countries there for such grave punishment to be dished out.
what could it have been? too many gays in Bandar Aceh? too many women willing to expose their busts at the drop of a turban?
Date: Thu Sep 08 2005 12:28
trotsky (Hambone) ID#248269:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
"I question your computation of cash costs for Kapul. After all, no one can know the unknowable."
huh? there's nothing 'unknowable' there, and it's not me who did the computing. they have a feasibility study out, and those cost estimates are actually based on conservative assumptions about the by-product credits. very likely costs will actually be lower in reality.
Date: Thu Sep 08 2005 12:20
trotsky (Earl, 11:01) ID#248269:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
sure, he remains a controversial figure, but the board has actually seen some pretty strong caliber additions over the past two years, so at least there's now someone holding him back a little.
also, considering that the company was on the brink of extinction in the depths of the bear market anno '99/'00, he has acquitted himself not so badly imo. he managed to get Julietta financed and built in spite of the company being forced to close its only producing asset ( Refugio ) in the late 90's and gold being off everybody's radar screen, with finance hard to come by in the wake of BreX. not an inconsiderable feat.
Date: Thu Sep 08 2005 12:14
trotsky (of course) ID#248269:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
with me being a fan of DROOY ( the only one left, although i seem to have picked up some not un-illustrious company lately ) who thinks the stock's potentially headed much higher, you have to take all my comments with a big grain of salt. : )
Date: Thu Sep 08 2005 12:10
trotsky (frustrated@Kupol) ID#248269:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
it has very high silver grades, and the silver by-product credits are one of the reasons production costs will be so low. if you actually calculate the dollar values of the gold and silver contained per the drill results, what you get is still a gold mine - with downright amazing grades, especially considering that its a near-surface deposit.
also, regarding the risk factors, if Bayerische Hypo and Societe Generale believe it's safe to throw $280 million at it, one can probably rest reasonably assured that they're not a major issue.
i've also seen criticism of Johnson centering on his propensity to raise equity right after releasing a set of stunning drill results, but in reality that only proves his good management sense. if you have to do financings, why on earth wouldn't you do them at the most opportune moments, while there's a reason for the stock price to be firm?
regarding GG, one must concede that Telfer has proven the skeptics wrong time and again , judging from the stock price performance and the stellar earnings results, but like RIP i have a nagging feeling that Alumbrera looks almost too good to be true , and even if those doubts are misplaced, the fact remains that copper now plays a too significant role for the company for my taste. of course copper has actually outperformed gold for a while now, but if one is in the secular gold bull camp one has good reason to be wary of too much copper exposure imo.
Date: Thu Sep 08 2005 11:31
trotsky (@homebuilder stocks) ID#248269:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
the whacking of the sector resumes after below expectations guidance by HOV. also, the major driver of the housing bubble, FNM, sees its stock drifting to fresh multi-year lows as we speak.
it appears that the bursting of the housing bubble happens in stages, similar to the demise of the tech bubble ( e.g., WCOM's stock price peaked almost two years before the stocks of its major suppliers, the telco equipment companies, peaked. many of them ended up falling well over 90% from their highs, e.g. JDSU, NT, LU, etc.etc. ) .
as soon as the government's housing statistics ( which for a variety of reasons mostly tend to be lagging indicators ) begin to show weakness , the Fed's rate hike campaign will be well and truly over.
Steve Saville opines that the market may be mistaken in assuming that the hurricane alone will be reason enough to stop the hikes - he thinks there first have to be signs of one or more major markets crying 'uncle' , both housing and stocks being major candidates. the fact that the stock market is rising already in anticipation of the rate hikes ending may actually delay the end of the campaign. not sure if this view pans out, but it's certainly worth considering. |
