₪ David Pescod's Late Edition June 6, 2007
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As the chart on the American Dow Jones shows you, it’s been a fairly decent year for American stocks and in Canada, with so many resource-based stocks, it’s been a lot of fun as well...maybe until today.
Morgan Stanley, one of the world’s biggest brokerage houses has advised its clients today to slash exposure to the stock market after its three key warning indicators began flashing a “Full-House” sell signal for the first time since the dot com bust.
According to Bloomberg, this warning has been issued by Morgan Stanley only five times since 1980. Morgan Stanley points to interest rates that are rising and reaching critical levels, concerns about inflation, P/E ratios near an all-time high of 20 and their composite valuation indicator which divides the P/E ratio on stocks by bond yields.
As we’ve mentioned many times, we wonder if we are ever going to have the traditional sell off in the junior mining stocks we see this time of year, and maybe this is precipitating it. Already we’ve seen for the last several months, a decline in the gold stocks and the Gold Index off almost 20% as gold prices have stalled and lately, there has been quite a correction in the junior uranium sector as well as in months gone by, any stock with uranium in its name seemed to go only up.
If this is just the traditional spring sell off to be bottoming in summer and get going again in the fall, so be it, but the Morgan Stanley people are obviously concerned as they suggest that their model is forecasting a 14% correction over the next six months.
Morgan Stanley, it should be pointed out, is not predicting a recession—it’s more or less just the market shaking off its latest excesses and then they suggest it’s “Back to the Races.”
GULF SHORES RES. (T-GUL) $0.35 +0.005
INTL. FRONTIER RES. (T-IFR) $0.95 +0.07
There’s more than a little joy coming from the North Sea today, on a day where the markets are big-time red. Oilexco hits a new all-time high, as does Ithaca Energy, a story we started following recently and have big hopes for.
In the meantime, we hear from Mike Turko out of London and Pat Boswell out of Calgary on tiny Gulf Shores and Intl. Frontier and they suggest according to Lundin Oil & Gas, they hope to be drilling their 41-42 project (Lytham in the North Sea) possibly as early as July 22nd.
They also expect to be drilling the Ridgewood play by late October, so for these tiny guys who had such a disappointment at Laurel Valley, hope springs eternal.
GOLDCREST RESOURCES (V-GCL) $0.82 +0.21
We are lucky enough to interview a lot of people in the mining and oil and gas business that travel in interesting circles and of course, we are always intrigued by what stories in the marketplace they find intriguing and of course, we encourage them to keep us up to snuff.
So shame on Carl Hansen the President of Andina Minerals for not screaming at us first about Goldcrest Resources. Sure, two days ago, he tells us about Goldcrest and their 8000 metre drill program, results of which should be spread over the next few months. He also pointed to the first press release of 106 metres with .66% copper and .49 g/t gold from a single hole. He mentions that this area of Burkina Faso looks encouraging.
When we ask him to play stockbroker, Hansen even says $1.25 is the first stop. From today’s activity in the market, it shows that it’s well on its way.
When we get a hold of Kevin Bullock, the President of Goldcrest, we learn how Hansen and Bullock got together ... they have offices beside each other on Bay Street and have followed each others work over the years. That’s why ironically when we ask Bullock to pick some mining stories other than his own, he picks Hansen’s Andina Minerals which he figures is worth a double because of their ongoing ability to increase their gold reserve on their Volcan Project in Chile. He also likes Messina Minerals (MMI) and suggests the project is now getting more tonnage in reserves than the market is giving it credit for.
Which gets us back to Goldcrest, which is tearing up the market on a day everything else is red. The best look at that is from Canaccord’s Junior Mining Weekly where analyst Graeme Currie takes a look at the story. If you want copies, e-mail Debbie at Debbie_lewis@canaccord.com.
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