Noticed this from a post on another thread. Seems to be a lot about PFN and relates to the Sudbury area play. An interesting read!!!!
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James Dines Calls A Dow Top, A Palladium Bull Run, And Deeper Tech "Bear Market" - April 14, 2000
By Chaya Cooperberg (ccooperberg@stockhouse.com)
StockHouse Columnist
Market forecaster James Dines may be the first to publicly call the current tech selloff a bear market, and says his buy
signal will only come when there is "mass fear." He expects the bull run for blue chips to reach its top before the
summer, followed by a steep decline. Right now, Dines is predicting a boom for palladium, and says it could chart the
kind of sky-high growth that the Internet group was known for. His top palladium picks include blue-chip Stillwater
Mining and Canadian play Pacific North West Capital.
James Dines has made a name for himself in the investment community as editor of The Dines Letter, a financial newsletter that
uses technical analysis, fundamental economics and the field of mass psychology to call market tops and bottoms, and herald new
trends long before they are publicly recognized.
Using his market theories developed over many decades of investing experience, and laid out in his most recent book Mass
Psychology, Dines has concluded that the deep tech selloff that trashed many former high-flying Nasdaq stocks, was indeed a
crash. "This is more than a correction," he says. "This is a bear market." He expects it to continue and won't issue a buy signal on
high-techs and Internets until there is "mass fear" in the market. The current bull market for blue chips will continue, he says, to hit
its top before this summer. "It should be followed by a fairly nasty decline." Dines predicted a spring rally for the blue chips in his
last newsletter.
When StockHouse last spoke with Dines in October, he was recommending a portfolio of Internets with a 10% in precious metals.
Now, he is extremely bullish on palladium, and predicts a "boom in palladium stocks the likes of which will certainly echo and may
even match the rise in the Internet group." In that sector, his blue chip favorite is Stillwater Mining [SWC], and in juniors, the up
and coming Canadian palladium producer, Pacific North West [V.PFN]. Stocks he likes for the blue chip rally are General Motors
[GM], General Electric [GE], Citigroup [C] and Chase Manhattan [CMB]. In Internets he still recommends the "four horsemen"
of his portfolio, Amazon [AMZN], Yahoo [YHOO], CMGI [CMGI] and AOL [AOL]. When the down cycle ends, he expects these
and other market leaders to "go sky high and probably above their previous highs."
? ? ?
StockHouse: What are you buying right now?
James Dines: Well, I tend to get into booms very early and that's when the real bargains are available. I think the next big boom
that is going to burst on the scene is going to be palladium. Here is a metal that very few people have ever heard of, primarily
because it's never had a bull market before. Most people have no idea what it's used for or which companies produce it. It's actually
used to make the catalytic converter of automotive vehicles and you cannot build a car without it, especially as vehicle emission
regulations worldwide become stricter and stricter and the new sports utility vehicles use even more palladium, the demand for it is
phenomenal and growing.
I first turned bullish on palladium itself at $150 per ounce five years ago. It recently got above $800 an ounce and it's the only
commodity in the world that got that kind of a bull run and it remains completely unnoticed and that again is a typical display of
mass psychology. The public simply does not see new bull markets when they begin and that always means that we're in the early
stages of it.
And the supply situation on palladium is terrible, I mean, Russia produces 65% of the world supply with the remainder coming out of
South Africa but it's all by-product. The Russian supply is a by-product supply of nickel and the South African supply is a
by-product of gold and platinum. So, the world is approximately two million ounces short a year to fill demand and that has been
filled out of Russian stockpiles. Nobody knows how big these stockpiles are, how long they'll last, but rumors are that they're
running out and if they do, I wouldn't be surprised to see palladium jump to jaw dropping levels, actually, because the automobile
makers have to have it. And if they have to pay an extra $50 a car for palladium, they'll do it and pass the cost on to the consumer.
There is going to be a tremendous rise in the price of the metal and you're going to see a boom in palladium stocks the likes of
which will certainly echo and may even match the rise in the Internet group.
StockHouse: What are one or two names that are best leveraged to an increase in palladium prices?
James Dines: We are now publishing a major report on palladium stocks and again, we're so early in the boom that very few people
know who they we are. I can't give you my whole list because that wouldn't be fair to my subscribers, but I will say that the blue
chip in this area is going to be Stillwater Mining [SWC] on the American Stock Exchange. We first recommended that at $11 «
and it is now only up to $40, which I don't think, even begins to represent the true value of the product. They've got great ore
deposits in Montana and it's one of the only two pure palladium producers in the Americas. The palladium report we're now coming
out with covers nine, ten, Canadian palladium stocks. One of them is an actual producer, the rest are low priced penny stocks in
Canada. There is a huge boom.
StockHouse: So there are many valuable penny palladiums in Canada right now?
James Dines: There are. It's a penny palladium boomlet! And in fact there is one of them that I bought at 40 cents last summer and
is now up to $4. So there is a tremendous bull market and, you know, making 10 times your money on a palladium stock is just as
good as making 10 times on an Internet stock. There is a tremendous opportunity there and we're still in the early stages of a
palladium boom. You'll be hearing a lot more about that in the next couple of years, I suspect.
StockHouse: Have you heard of Pacific North West Capital [V.PFN]? Is that one of them?
James Dines: That is one. That's the one I bought.
StockHouse: The "Dines Wolf Pack Theory," outlined in your book, basically states that stocks within the same group tend to
move together. Are we looking at a rebound for all the other metals then?
James Dines: I'm impressed that you've been studying my work. Yes, that was also in the Mass
Psychology book. Yes, the Wolf Pack Theory works because companies in the same industries
tend to be regulated by the same economic factors and the way they use that is to buy laggards in a
group that is moving together. And the metals, if you'll note, have been stronger for some time
although we have been getting a weakening in the last few weeks here in copper and a few others.
Generally that's true, but in this particular case palladium is a special metal.
First of all, it's a precious metal so normally it would tend to move with gold, silver, platinum,
rhodium, osmium, etc. However, this is an industrial use and there's a very special circumstance. I've never seen anything like this
before. The Russians really control the market with 65% of the production. All they've got to do is stop releasing reserves and the
price is going straight up. And that's because there simply is not enough.
Now, this has begun a mad scramble in the mining industry and of course, the Canadians are in the forefront of it. Most mining
people around the world are still asleep on the subject but the Canadian, especially the Sudbury area and the Thunder Bay area, I
think there are some very good selections in there and I cover that in my report. The answer is that normally the metals tend to
move together, they've been getting sloppy lately, but palladium is absolutely unique and there is just nothing else like it in the
world.
StockHouse: What is your portfolio makeup like right now, what other sectors do you like?
James Dines: We have shifted considerably out of the Internet space as more and more people have gotten bullish on it and gone
crazy on it. And we've shifted on the palladium and cash with the [10%] hedge in gold, so my portfolios are pretty conservative right
now. Although we are going to be recommending something in the organic food division in the next Dines Letter that will be coming
out next week because I feel that more and more people are becoming aware of the dangers of herbicides, fungicides and
pesticides. So, there are stocks that I would recommend right now. I'm sorry that I can't give you the name of that, but I've got to
give it to my readers.
StockHouse: When you do issue the buy signal on Internets again, do you expect them to have the same sort of momentum that
we have witnessed? Or have we seen the end of those astronomical stock performances?
James Dines: Oh, I think there will be more performance because now people are aware of them. They have seen how they can
move and I think the next bull market by the Internets are going to go sky high and probably above their previous highs. So, I'm
looking for a tremendous bull market in the Internet. It's not over yet, the Internet, we're in the first inning. In all of China there are
only an estimated 10 million people on the Internet and we've got over a billion more to go. India is just coming on stream; Africa is
yet to be heard from; South America is beginning to get into it. No, the Internet is going to grow like a weed but the stocks
themselves are a function not just of that growth but also of mass psychology. And that, of course, has its cycles. We are right in a
down cycle in the technology area and that has yet to spill its guts and splatter on the sidewalk.
StockHouse: It does seem to have the ability to go much, much deeper if the average retail investor hasn't clued into the extent of
this downturn, as you say.
James Dines: That's correct. And there is another very important factor and that is margin. I am bitterly against buying on margin.
And that is because that is the only way they can force you to sell. Usually beginners do it and get tempted by it and I think a lot of
them have purchased stocks on margin with money that was destined to pay their taxes on April 15th in the States. I think they're
in for a real problem and, of course, forced liquidation forces you out of these wonderful Internet companies at prices that are way
too low. But it does give us the opportunity to buy at those prices. And that's what I'm really waiting for, a gusher of margin
liquidation and that will give us the downward momentum that will finally create the next buy cycle for us.
StockHouse: We are hearing that there is going to be large amounts of consolidation among technology companies. One analyst
has said that only 25% of companies will survive. Do you share that sentiment?
James Dines: I don't know the exact number but I think the prediction is absolutely accurate. You're already seeing it with a
company like Cisco [CSCO]. People want one-stop solutions. When I was a kid you used to have grocery stores in this specialty
and that specialty and then, of course, the supermarkets came into being and they sold all kinds of things. So that's what's going to
be happening here. I think Cisco grasps that. That's another brilliant management. They grasp it and every time they see something
that's needed they just acquire it and I think you're going to see a huge number of acquisitions and consolidations. That was one of
my predictions in my forecast issue and another one is that the dinosaurs are finally going to wake up and start acquiring some of
these Internet companies especially as they get beat down. Because they've simply missed the boat entirely and they don't have
the time to develop themselves and they have plenty of money. They're stupid and rich and the way that'll get into the Internet is
simply acquire it. But yes, there will be huge numbers consolidations. There is certainly not enough room for all these companies.
StockHouse: What's your expectation for the timeframe of this blue chip rally we're seeing? Will it continue until we see the
high-tech, the Internets come back, and the flow of cash moves between the two again?
James Dines: That's a tough question. I don't really work that way. I don't know the future, I wait to see how things evolve and
develop. I've got a target for the Dow to make its top sometime before this summer and it should be followed by a fairly nasty
decline.
StockHouse: What blue chips do you like right now?
James Dines: I think there is a whole range of them. I think GM [GM] is a good one and they've got a really nice chart. General
Electric [GE] is another good one, very bullish up trend. I think Citigroup [C] and Chase Manhattan [CMB] I think is a good one.
There are a lot of real good blue chips out there and powerful upturns.
StockHouse: Thank you very much for your time Mr. Dines. |
