₪ David Pescod's Late Edition June 19, 2007
GOLD $664.70 +4.80
CDN. NATIONAL RAILWAY (T-CNR) $56.20 -0.90
NATURAL GAS $7.52 -0.17
He’s one of our favorite market prognosticators and every month we look forward to his writings. We are talking about Donald Coxe, the Global Portfolio Strategist for BMO Financial Group based out of Chicago and many of his predictions over the last five or seven years have come so true.
His latest issue of “Basic Points” is out and as far as we’re concerned, it’s the one item of “must-reading” for all market players. He’s been that accurate over the last while. Only this month, there is a bit of a surprise in the reading and for anyone involved in real estate, particularly in places like Vancouver, Calgary and Toronto that has seen what’s happened in areas of the United States, this could be very important.
His investment recommendations are points that you probably know of quite well by now. First of all, “remain overweight the base metal producers” he suggests. He also thinks you should remain overweight the oil sands producers and market weight the other oil producers. He is now suggesting to “begin to build exposure to North American natural gas producers.”
Meanwhile, the gold bugs, who have been disappointed the last six months he is suggesting you “remain overweight gold and gold mining shares.” He writes, “Gold bugs sang so long that inflation had come back that many investors finally got tired of waiting for their claims to come true. Bit it also took a long time for the cicadas to return; they are back. So is food inflation.”
Which gets us to one of his major recommendations for this issue and he suggests “the most attractive stock group now are companies which benefit from food price inflation - such as meat packers and supermarkets—and those who help farmers boost outputs, including the feed and seed companies, and the farm machinery manufacturers. The least attractive in the food sector is the ethanol producers.” Hmm. Isn’t that interesting?
But, the major point of this entire issue is taking a look at the bond market. We’ve all heard for the last year or so, so many experts suggesting that it was just a matter of time before interest rates start going down and rescue us from a market correction (Oh, by the way, he suggests a correction in this market is long overdue).
What Coxe is now suggesting is that over the next two years, he wouldn’t be surprised to see Treasury Rates and with it, potentially mortgage rates increasing 2% over the next two years.
If you own a big mortgage on a big house in Vancouver or Calgary, why don’t you take a look at what your mortgage payments are now and what they might be if mortgage rates are 2% higher. Wouldn’t that put a crimp in the real estate market?
Meanwhile, one other comment he makes is that if and when we do get that stock market correction which he feels is inevitable, he writes, “financial stocks are traditionally the most vulnerable to a correction caused by rising inflation and also rising interest rates.”
ANDINA MINERALS (V-ADM) $3.07 +0.09
This is probably one of the better of the gold explorers, based in a relatively safe country (Chile) with a management team that has done it before—actually, a couple of times before. Their Volcan Project in Chile seems to be working out well and today and Canaccord analyst Steven Butler does another report on the project and once again, he is looking for $7.00 down the road.
As we’ve written a few times, gold has been in a down market for the last six months, but many analysts are suggesting we are getting to a very important support level ... or at least what we hope is a support level.
If and when gold gets going, I suspect Andina Minerals is going to be a story you are going to want to have. For a copy of the brief comment, e-mail Jennifer at Jennifer_lagdamen@canaccord.com.
ANGLO MINERALS (V-ALM) $2.90 +0.40
Two years ago, it was suggested there were as few as six uranium stocks...these days, there are (by some calculations) as many as 600. With the boom in commodity prices, there has also been a boom in the number of public companies out there and it’s easy to get lost amongst the myriad.
It’s why, more so all the time, the role of the investor relation person is becoming very important to make your story stand out from the deluge. As with most professions, there are investor relations people and then there’s really good ones.
We’ve mentioned Scott Koyich several times and these people from time to time become pretty good stock pickers. Scott Koyich’s previous top pick for us was Anglo Minerals which today hits new highs and is now a triple for those who picked up on his idea that we’ve written about a couple of times.
With this stock sailing we remind folks that his current two favorites in the speculative industry are Ucore Uranium which will shortly be drilling a previous uranium producer in Alaska sometime in the next 2-3 month and March Resources which will be drilling a high profile/high risk/high reward oil and gas play in inland Chile sometime in September.
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