RAMBLINGS FROM DOWN UNDER
Tony Locantro
I must say my clients and I have had a wonderful year, although we worked hard for the end result and if anything managed to underestimate how far trading volumes would carry some stocks. Gold managed to reach my $418 target during the final trading session, and if Kitco is correct it didn't push through that level so I will claim a victory for the "sit down and shut my eyes" method of commodity/stock selection. Maybe now I could find an old shoe box, paint it black, throw in some paper and sell if for $5,000 and make outrageous claims on its ability as a market forecaster. Another option would be to organise bus tours to the Perth Zoo (via the most expensive souvenir shops first) then charge people to have monkeys throw starts at the mining pages. Well can I call myself a guru? I guess it depends on how much milk I want from the cows, but even I realise it was more "arse than class" My call on silver ended up being on the conservative side, and at the time I came up with those numbers, I should have given myself an uppercut.
Today was spent flicking between the top 203 and 100 music videos, catching up some other best of lists, and thinking if such effort went into developing the art of hindsight where are the suggestions for the best of 2004? I could spend months looking back at my successes and failures during 2003, and which stocks made the grade, however my biggest lesson learnt during the year was procrastinating over booking tickets to "The Wiggles". In future I will book those tickets as soon as I see the event advertised as it caused far more grief than selling a stock early that still had some juice left in the tank.
I looked back at an article I wrote in 2002, and was surprised to see I felt all my efforts would come to fruition in 2004 in terms of commodities/PM's. Well I can say I was wrong because according to numerous emails I have only recently received I have won a lottery in Holland around thirty times with further wins likely to come well into 2004.
Some Observations
- Two markets that managed to crash in 2003 were DVD players and crayfish. With the gap narrowing between a regular Happy Meal and WA's finest the balance between seafood and microwave meals in the deep freeze is expected to shift significantly.
- Who would have thought you could be buying DVD players within close proximity to the bribe counter at your local supermarket for half the price of a VCR? Something just isn't right here, and the appearance of new brands suddenly gracing the junk mail, may bode well for consumers but paints a somewhat nastier picture on the economic front.
- Surf shirts made in China are rising in price to the tune of 10-20%. What gives here? I updated my casual wardrobe for the first time in years, and was shocked at the lack of buying power despite reduced labour costs.
- What has happened to all those renovation shows apart from the non-rating season? Where is all the press on real estate? Surely two interest rate hikes before Christmas shouldn't simply vanish off the mainstream press radar.
- Australian retail figures were up 5% on last year as crowds stormed through the doors to buy goods they do not generally need or even want once some serious thought is given to the matter. Maybe those housing valuations are best put off as far as possible, and juggling the credit card honeymoon rate cycle with the precision of a circus clown is paying dividends. Apart from updating my comformodore for the sake of the safety and age of my current vehicle, I am still apprehensive when it comes to splurging on big ticket items as looking at a 58cm TV is fine for now. If plasma's tumbled like DVD's then I may consider having one on the bathroom wall in a few years.
- Gold, silver, copper, zinc, lead and tin have hardly captured the imagination of the retail investor. Maybe they dismissed the rises as attacking the upside when the sellers are least expecting it, or commodities are doing nothing more than returning to their longer-term averages. What bubble?
- German investors are starting to regain their appetite for Australian small-cap stocks, and some of our juniors have doubled on some enthusiastic reports put through the magical translator that tends to double the usage of "sensational" and "multiple". If only ones sex life was of the calibre of a German special feature. If one delves into how the Nasdaq bubble really took hold on our shores the return of the Germans is the best sign since the spec market started to rumble in May 2003. Hogans heroes indeed.
- I have had two email replies from people living in the same suburb, and a repeat of a meeting at a local watering hole took place during the week. Similar seating position and discussion, with the first one forming the basis of an article that with the benefit of hindsight ended up working quite well.
- I have had numerous calls from clients that have read articles from analysts based in the US and Canada calling for major corrections in PM stocks. The Australian stocks are far from being overheated and if anything we went through our nasty corrective phase well before the Canadian stocks took a pit stop. There are opportunities developing between a number of markets, and through the benefit of dealing for a South American boutique fund manager I have started to get a grasp on the international flow of funds taking into consideration price appreciation/currency issues. The fact our stocks took such a brutal hammering from the penguins has stretched the turning cycle considerably, and market depths have only recently undergone some improvement on the sell side in particular.
- Gold stocks are now starting to run up in anticipation of further drilling success as opposed to stunning the market and moving strongly post announcement. This phenomenon indicates the bull market has advanced just that little further, and another shakeout may not be that far off. Our major gold producers in particular have only recently been allowed off the canvas after being beaten into submission by both retail and institutional investors. From the selling many may have forecast another $14 drubbing on the POG, but it never came. The miniscule movement on the move to the $415 level has again provided ample entry opportunities at levels generally below the June 2002 short-term highs.
On A More Serious Note
The devastation in Iran is a timely reminder that a small dose of red on the spreadsheet is not a life-shattering event and whilst an interest in the markets can be healthy it is not the main game. When Gympie Gold was placed into voluntary administration this due to a crippling fire at their coal operation, we had a company traveling reasonably well with a $130m market cap suddenly fall from under the workers and a large number of resource advisors/investors. Combine this with a number of high profile company collapses regardless of the underlying contributing factors and you have another kick in the guts in terms of resource investment. Whilst for many readers 2003 was a most enjoyable and profitable there is always a case for some diversification, although having a balanced portfolio pretty much entails your gains cover the losses and you end up going nowhere other than matching the rate of inflation (this may not be a such a bad thing down the track).
One prominent Australian writer should be applauded for his social conscience and fears associated with a rapidly appreciating gold price and its implications. From my experience and meetings with gold investors, I must say they certainly have a conscience and do not want to see crime and unrest spiral out of control. I spent 8 good years working the beats in some of Sydney's rougher suburbs (ideal training for my current profession), and never met anyone who resorted to petty theft to cover a margin call or build his/her PM portfolio. Housing prices tanked here in 1989-1990 and out came "The recession we had to have bumper stickers" rather than fights over lettuce leaves in supermarket rubbish bins. Sure the pyramid investment schemes will continue and the vast majority will get hit for six financially, but unless things get really out of hand I doubt the law abiding decent citizens will resort to targeting old ladies are a surefire way of attaining a regular cash flow. Whilst you may not receive the recognition you deserve Mr Bloom, gold investors from what I have seen are decent people simply using their knowledge to keep ahead of the game with an almighty conscience that sees many humble in both victory and defeat.
I hope all readers have used 2003 as their platform for building their commodity/PM holdings and knowledge base. As I have stated earlier 2004 looks like being one of the most interesting and potentially dangerous years for investment since the flirtation with tech stocks and more importantly since mining stocks went berserk in the mid 80's. I have tipped gold to peak at $470US, silver at $6.80US in 2004 with some frantic trading early in the year with the assistance of a new breed of penguin and revved up German investors.
Those attractive girls wearing the "Property Millionaire" uniforms selling the virtues of off the plan buying and $15,000 weekend courses may yet reveal the gold skirts and silver pom poms. The real BS'ers are yet to enter the fray, and I am still waiting for a commercial station to contact me with ideas for my outback mining show with the 9.30pm drilling.
All the best for 2004 it sure will be the year that will make or break us regardless if we get the speculative blow off or not.
Disclaimer
I have direct/indirect holdings in the stocks listed/mentioned above. Clients have considerable holdings in each of the stocks and may change these holdings without notice. Each of the stocks listed is to be considered as speculative, and may not be appropriate for individual investors. No buy recommendations have been provided on the listed stocks, and the opinions on each are those of the author only. It should also be noted that some of the stocks may have very low levels of liquidity and may result in significant percentage rises and falls. Please conduct further research and consult your financial advisor before making an investment/trading decision.
About the Author
Tony Locantro is a Perth based Senior Private Client Advisor specialising in the junior resource market. He is the author of "The Green Room, A Guide To Speculating On The Australian Stock Market" (available on request) and presents on resource stock investment. He has been a contributor to a number of precious metals and market related forums.
1 January 2004
If you would like further information or are interested in becoming a client I can be contacted at locantro@iinet.net.au
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