₪ David Pescod's Late Edition January 3, 2008
GOLDCORP INC. (T-G) $37.50 +1.17
KINROSS GOLD (T-K) $20.65 +0.65
BARRICK GOLD (T-ABX) $48.30 +2.65
GOLD (February Delivery) $868.60 +8.60
There’s an old saying that when the going gets tough, the tough get going...so here we are off to California for a little bit of a breather and trying to get a little reinvigorated. We’ve done a little bit of whining and complaining over the last few months, that with gold which in the last few days hit new record highs of $850 plus and oil which has recently hit $100, those of us in the natural resources should be having a whole bunch more fun. Yes, we’ve been whining a bit, but you can validate some of the concerns going on with worries about a recession in the United States and of course, despite high oil prices, much of the gains there have gone through higher costs for the drillers, higher costs for trained personnel and the big winners of course are everyone from Alberta to Nigeria who keeps raising royalty rates.
Same problems in the mining sector, with historically high base metal and gold prices, where trying to find skilled labor anywhere from Canada to Chile is a problem, where steel prices have tripled over the last few years and cement prices through the roof.
Meanwhile, the delays in getting mines approved just seem to take longer and longer.
Anyway, here we are in California reinvigorating ourselves and folks, this is a great place to be and it’s been a while since we’ve been here. We’ve forgotten how much fun it is.
The Californian’s along the coast have done just a marvelous job of building parks and piers and all sorts of places that picnickers can go along the coast, all the way from Los Angeles right down to San Diego. It’s beautiful and all the piers that you can visit and mingle with people and watch the surfer’s ... it’s just beautiful. There was only that one freaking seagull that ruined our day in Huntington Beach, which was New Year’s Eve and there were tens of thousands of people out for the night and there had to be 1000 surfers. A great place to watch people.
Of course if you are down here with the kids, there’s so much to do. Universal Studios is just a great place to take the whole family, see how the movies are made and take some great rides. On a busy day in peak season, they can have 30,000 people, on a quiet day with bad weather you can see as few as 3000, so if you have to go in peak season buy the VIP passes so you can just scoot to the front of all the lines, despite paying a bit of your portfolio to buy the pass, but it means you will see twice as many rides.
San Diego Wild Animal Park is also a must-see for the kids. And all of these tours take one very full day to get everything seen and done. Sea World was started by four frat brothers from USC back in 1962, who thought building an underwater restaurant would be a great business to get into. The restaurant didn’t work out, but over the decades, Sea World has become one of the must-see places down in Southern California. Shamu is one heck of a big fish and while that show is a little bit too much Hollywood for us, the dolphin show is simply spectacular and we bet that if you go see it, the performance is going to suck you in ... you see it—you’ll know what we mean.
But sooner or later we have to go back and face the music and while the markets particularly the gold stocks (the seniors at least) have broken out, sooner or later reality hits as we get into the new year.
We have to start with Don Coxe, the one prognosticator who has predicted many things right, although certainly not the correction we faced over the last few months. What is he looking at, according to his report for the new year?
1) Remain heavily underweight banks, particularly investment banks and he makes an interesting comment about the “stupidity of some of those investment banks over the last while.”
2) Remain overweight emerging markets with emphasis being on those countries that have lots of oil and gas to export.
3) He was previously fond of India, but right now he is a little bit worried that if they have a weak monsoon they might not be able to produce the food that country needs and suddenly their finances may not be quite as solid.
4) Remain heavily overweight agricultural commodity products as he feels that’s probably the pre-eminent investment of the day.
He is also still strong on oil and gas and still Alberta oil sands. He is also suggesting it’s time to accumulate refineries, particularly those that can handle the high-sulfur crude that the world is shortly going to be full of. He retains an interest in the base metal stocks with long-life reserves and of interest we note, is his thoughts on stagflation and that would not be good for bonds.
We will be back to work on Monday and hope everyone is enjoying a Happy New Year as well.
DELTA PETROLEUM (US:DPTR) $20.39 +0.94
We’ve been following Delta Petroleum mainly because Eric Sprott of Sprott Asset Management has liked the potential for the play a lot and his funds have had a chunk of this stock as well. Why he liked it is they have exposure to some of the biggest natural gas plays in North America, all of them in the United States.
The problem of course over the last while, is natural gas. Inventories remain high, costs are high, there has been record drilling in the U.S. so there is no sign that prices for natural gas can go high any time soon.
Meanwhile, people (us included) worry how low gas prices can go this spring and summer if we suddenly don’t get one heck of a winter.
Anyway, Delta also took a huge shot from Barron’s Magazine which had some very negative articles about it just a few months ago. Well yesterday that changed when Kirk Kerkorian, one of the richest folks in the United States decided he wanted a big chunk of the company and bought 36 million shares at a big premium to market price. One could only assume that Kerkorian didn’t get rich by not doing due diligence, so whatever he saw, he obviously liked.
Obviously, this story may continue and in the meantime, we still wonder three years into Delta’s history on their Washington state play, we still have no results. That’s a long time with no news at all.
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