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To: long-gone who wrote (20487)	10/2/1998 10:20:00 PM
From: waldo	Read Replies (2) \| Respond to of 116753

USAGOLD Forum is hot tonight: usagold.com <<Merrill's in deep. It's obvious. How does the Chairman of Merrill Lynch lose $22 million of his own money in LTCM, not to speak of what was lost by ML, and then lead the charge for a Fed brokered bailout? I can see why certain Senators, including the Chairman of the Banking Committee are talking about a full blown investigation of this debacle.>> <<This is indeed fascinating. Here we have one of the financial institutions that agreed to bailout LTCM now on the verge of going under itself. Lehman's problems revolve around its mortgage portfolio. There were additional rumors, reported by Reuters, that Bankers Trust borrowed heavily at the Fed discount window because of its exposure in the hedge fund, Omega Advisors, Inc. The New York Fed denied any such borrowing. Do you get the feeling that things are spinning out of control?>> <<Watching AG, Rubin beg for money to the IMF should give us a clue. CLinton literally went off on this subject today and I believe that should tell you something. The IMF is the clue here to a move for gold going not to 350 or 400 but to 600 or better. What the IMF does is soak up liquidity and keep the money supplies of the world down. By issuing bonds to soak up liquidity and not having to print money to be placed into the real world the IMF was able to keep inflation down. Bonds soak up liquidity and cause financial inflation which does the gold bugs harm.>> W

To: long-gone who wrote (20487)	10/3/1998 6:11:00 PM
From: goldsnow	Respond to of 116753

Bottom fishing: How to spot a good buy By John Wasiliev Sharemarkets could not be more challenging. Right around the world they are volatile and susceptible to whipsaw moves. At the same time, many Australian shares – particularly in resources companies and the smaller industrial companies – are trading at or near their lowest prices of the year. This raises the question: is a good time to begin bottom fishing? It always makes sense to buy shares when prices are low. But more appropriate advice at this stage of the investment cycle is to investigate opportunities and be very selective. Based on pure price comparisons, shares in many companies on the local stockmarket look cheap. And there is no shortage of suggestions from brokers on bargains where money can be made. But just because particular shares are at low prices is no guarantee they represent good fundamental value and will deliver the sort of returns investors have become used to over the past five years. "A stock could be on a roller-coaster for any number of different reasons," says Tim Lincoln, managing director of Melbourne-based fundamental research house Lincoln Indicators. "Currently it's shares in companies with a large Asian business exposure, an influence that won't go away in a hurry." An important new consideration which became a factor in the past week is the effect of the reduction in official US interest rates, acknowledged as action to cushion the effects on the US economy of increasing weakness in foreign economies. Analysts say that what is also being addressed is confidence in financial markets and the risk of worldwide deflation. "Much of the world has been moving towards a deflationary environment for the past six or seven years, with inflation on a steady decline," notes Michael Fitzsimmons, head of Australian equities at ANZ Funds Management. "The bankers are seeking to avoid a tip into outright deflation. If they succeed and the interest rate cuts reignite economies, then those who say now is a good time to buy shares are right." This is important for share investors because deflation is a poor environment for equities. Any benefits that flow from lower interest rates are usually offset by reduced growth in corporate profits. Shares like at least some inflation, even if it is only modest. What the bankers are seeking to avoid is a spread to other developed economies of the Japanese malaise. Japan has for some years had no success in stimulating its depressed economy with interest rate cuts. At the corporate level, this has led to a two-tiered sharemarket. The top level has companies with competitive advantages that are capable of manufacturing growth. They are keenly sought and continue to attract a growth premium. At the lower level are companies that are cyclical and exposed to the economy's whims. The risk that they may not deliver regular profits has seen their appeal slump dramatically. Interestingly, this has not been the trend just in Japan. Over the past year, there has been a global investor focus on big companies. The giants of business have continued to surge ahead – in Australia the examples include Telstra, News Corporation, the leading banks, Lend Lease, Brambles and the big retailers – while economy-sensitive resources and smaller companies have slipped into the doldrums. This scenario makes it vital for share investors looking for opportunities to do thorough research into the fundamentals of companies before buying. The important first step before buying shares is to work out whether they represent fundamental value. Companies that do not pass the fundamental tests should be avoided. "It's also important to be realistic," advises David Wright, research director at Melbourne-based AssetWare Investment Research, which runs the InvestorWeb, an internet-delivered fundamentally driven research service catering for DIY investors. "Our research is certainly showing there is plenty of potential value in many smaller companies as well as resources companies. But while markets remain volatile and the focus stays on big stocks, even though the small stocks are attractive in value, if investors are not attracted to them they are not really going to do very much," Wright says. What this leaves is an opportunity for investors with a long-term horizon to include sound smaller companies and resources shares selectively in their portfolios. A word of caution, though, is that while prices of these investments are now close to yearly lows, there is no assurance they may not fall further in the short term, especially if the interest rate initiatives fail to prevent a major slowing of growth. According to Tim Lincoln, this makes it all the more important to do your homework before buying any shares that look like bargains. Lincoln Indicators, started by his father Merv Lincoln, offers a software internet service to serious investors called Stockdoctor which analyses the financial health of companies. It uses fundamental analysis as a filtering process to separate quality companies from those that are struggling. The value of this identification is as much to avoid the strugglers as to identify the potential winners. Fundamental research is based on detailed analysis of company accounts using many time-tested techniques and ratios. "The No 1 criteria for share investment should be a quality balance sheet, especially during these volatile times," says Lincoln. There should be no guesswork or wishful thinking in any decisions. A strong balance sheet, he says, is one that shows good cashflow from a company's business activities and a consistent pattern of increasing earnings. With smaller companies which are still developing their enterprises, maybe just coming out of a research phase, an investment plus is a positive trend, even though the company may still be performing only modestly. A low debt level is favoured, with no more than a third of a company's assets being funded by bank finance. Also highly regarded is profit retention. While many companies in recent years have been paying out a high proportion of profits as dividends to maximise dividend imputation benefits, profit retention shows a company wants to fund future growth. This is a good sign as it indicates a company with enterprise. Dividend analysis is important. A consistent high dividend indicates that a company must be generating good profits and there must be some quality there. "We look at dividends because as an investor you need that mix of capital-return stocks and dividend stocks," says Lincoln. "Your dividend stocks are generally your low-risk, rock-solid quality stocks that are financially strong. Your capital-return companies are generally your small- to medium-sized companies that are either on a growth or a recovery trend." Issues such as management quality, he says, tend to be incorporated in the balance sheet. A good, strong balance sheet means a company must be well-managed. Good companies are those that work their assets hard and Lincoln regards an 8 per cent return on assets as a good solid return. afr.com.au