THE PEN IS BLUE
Tony Locantro
There is a private joke in my home in relation to some of the sure things in life. One of them apart from the obvious that are quoted everywhere is that "Liar Liar" will be screened on a Friday night at some point during the year. A few weeks ago the screening of one of my favourite comedies took place on you guessed it a Friday night, however on this occasion I elected to spend the evening discussing mining stocks over several beers with some workmates.
The scene where Jim Carey is struggling with a pen was not only a moment of comic genius but also brings us back to the property boom and how a signature in either black or blue ink is set to haunt those embroiled in their own nasty version of "Sex, Lies and Videotape". For starters the property promoters would often employ a bevy of attractive young women to sell their books and investment ideas at conferences, use hard sell tactics bordering on the outrageous and feature investors driving expensive foreign cars to illustrate what we would be missing out if we didn't join the bandwagon. Combine this with cheap money and greed and it was obvious it was all going to end in tears. Financial publications these days seem to be running stories centred on an inevitable 20% correction, whilst on a current affairs program screened only tonight a real estate agent had the final crack when saying confidently "It is a great time to be buying".
There is little point dwelling on something that has been in the making for sometime, however when looking at the bigger picture in resource stock investment it is worthwhile to ascertain what is happening in everyday life and what impact it may/may not have on share prices.
CURRENT BOOMS
Shrek 2
Have you ever tried to walk around a department store recently and not had your 2-5yr old point out Shreck or Donkey? My 2 year-old daughter has to be literally surgically removed from those giant cuddly toys that seem to occupy every section of the store these days. At this stage she owns a cheap cup, one puzzle and a souvenir from the movie (empty popcorn container). I cannot fault the marketing on this one and I guess if you provide entertainment that takes the piss out of society even a contrarion wouldn't mind opening the wallet once in a while to support their cause.
Big Screen TV's
Still going strong but I am sensing that desperation and a decent case of the wobbles (not a new group of bright coloured T-shirts aimed at kids) may not be far off. The bonuses these days are increasing in percentage terms relative to the price of the TV itself.
Electrical goods at supermarkets
"Hi honey I got the loaf of bread and two litres of milk, oh and by the way I bought this cheap 6-head VCR for $129 as I thought the kids could do with a backup". Enough said.
Boy bands that actually play instruments
Special thanks must go to Chris Cornell and Audioslave along with Scott Weiland and the ex GNR members minus Axl (Velvet Revolver) who have returned hard rock to the menu after a lengthy absence. Instead of having the boy bands hold hairdryers and themselves we now have them actually playing real instruments and creating real music. Nothing like a return to meat and potatoes after eating processed garbage for the last few years. (It could be said about the resource market also)
Designer Jeans
I remember buying stonewash jeans in 1991, maybe I should have kept them for safekeeping?
Can the current craze outlast marble wash or even the citrus revolution of 1996/1997?
Emergency Mobile Phones For Kids
Road rage, ATM rage, now I often get a case of ringtone rage.
SMS Chat
Instead of the usual 1900 numbers you can now engage in banter with someone having a laugh at you on the other end for around $3.95 per message. These advertisements are turning the once reliable men's magazine into glossy glorified crap pushers. Anyone falling victim to these should really give him/herself an uppercut prior to whining to a current affairs program that they were duped.
Broadband
Down come the prices to dial-up levels if you believe the advertisements, however with the shellacking I copped with my initial flirtation with the internet I think I will stick with dial-up until it is phased out.
ON THE WAY OUT
Off the plan real estate investments
Finally the vacuum has been switched off, and unfortunately it is likely to get very ugly. It would not surprise me at all to see a Royal Commission (similar to the ones that claim to clean out various Police Services every so often) targeting the unit developers with the aim of making an example out of someone.
Finding Nemo
To those advertising geniuses the game is up. My daughter is becoming fed up with spotting Nemo on a regular basis and no matter how hard she tries to persuade me I refuse to take her anywhere near an Aquarium.
Songs featuring multiple artists
It seemed the music business got carried away with quantity and not quality and we all paid for it with multiple lines required to explain who was actually singing the song. Good riddance.
Reality TV
A men's magazine summed it up perfectly when discussing a reality TV program, "Cast of thousands, audience in the tens". Despite having more derivatives than tuna fish and Tim Tams the bubble burst quite abruptly and these days the thrill of meeting a contestant on Big Brother is just not there anymore. I doubt Miriam burst the bubble but rather delayed the inevitable just that little bit longer.
THE AUSTRALIAN MINING SECTOR
These days my writing is driven mainly by frustration rather than excitement and I must say the shellacking dished out to our junior mining sector is now bordering on criminal. The tax loss selling in Australia this season has been spiteful and not dissimilar to the result you are likely to get when you approach a group of girls at a nightclub drinking water with several beers in the system. Stocks that appear cheap are suddenly being sold off on heavy volume as the brunt of the selling has targeted new floats that have barely completed their first drilling program and still have a few million in the tin. The mentality of the sellers is easily assessed as the free attaching options (usually half the volume of the fully paid shares) are discarded within minutes of the initial transaction taking place. We now have many companies with top-class management and projects trading below cash backing, where a return to their issue price could well provide a 100-200% return.
From the companies I have been speaking to throughout this fiasco many are now facing the dilemma of not being able to find qualified drillers so they can get some positive news into the market to support their share prices even if they manage to snare the services of a rig. The construction industry is suffering a severe shortage of staff on the mining front and those that stuck with the system and did not take up positions in IT companies are now being well rewarded for their experience.
In my ten-years of speculating (sixth year as an advisor) I have never seen such value in the Australian Mining Sector as I am seeing today. The share prices of numerous stocks were trading well in excess of their current levels when the POG rallied to $329 earlier in the piece. We now have LME stockpiles falling regularly across the board, a shortage of meaningful discoveries, and future mines that are nothing more than some sketches on a piece of butchers paper. The old groups of men drinking red wine dressed in their finest chambray shirts have laid out the goodies, now all we need is the retail investor to come and liven things up a little.
If only those that are throwing away their mining stocks with in-ground resources realised that out of 1000 mining projects generated, 10 make into feasibility and only ONE is likely to become a mine. When we are led to believe that every drill hole will turn into a producing operation one would hope that you are belting out stock in similar fashion to those bombarding my clients spreadsheets with red ink today.
"The pen is blue, the pen is blue, the goddamn pen is blue"
30 June 2004
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. The information on each stock has been derived from ASX reports, company discussions and a site visit to Long Victor in 2002 and 2004 (Independence Group) and Arafura's Nolans Bore Project in April 2004). 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 free to prospective clients via email request) and presents on resource stock investment. He has been a contributor to a number of precious metals and market related forums.
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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