World Of Wallstreet

www.investorvillage.com Precious Metals Stock Picking Year-To-Date Results

A rising market makes everyone feel like a genius and I'm not the only one having a very good year. If you look closely you'll see I didn't enter the contest.

What do you make of this?

MontyHigh, www.worldofwallstreet.us

Hussman: 80% Chance Of Another Market / US Economy Plunge In 2010

http://www.hussmanfunds.com/wmc/wmc091130.htm

 

In my view, Hussman is the best of the mainstream (non-conspiracy type) commenters. I take this pretty seriously. 

 

Here's the best part (my underlining):

"In my estimation, there is still close to an 80% probability (Bayes' Rule) that a second market plunge and economic downturn will unfold during the coming year. This is not certainty, but the evidence that we've observed in the equity market, labor market, and credit markets to-date is simply much more consistent with the recent advance being a component of a more drawn-out and painful deleveraging cycle. Meanwhile, valuations are clearly unfavorable here, and even under the “typical post-war recovery” scenario, we are observing an increasing number of internal divergences and non-confirmations in market action.

 

As Gluskin Sheff chief economist David Rosenberg noted last week, “Even if the recession is over, the historical record shows that downturns induced by asset deflation and credit contraction are different than a garden-variety recession induced by Fed tightening and excessive manufacturing inventories since the former typically induce a secular shift in behavior and attitudes towards debt, asset allocation, savings, discretionary spending and homeownership. The latter fades more quickly.

 

“This is why people didn't figure out that it was the Great Depression until two years after the worst point in the crisis in the 1930s; and why it took decades, not months, quarters or even years, for the complete transition to the next sustainable economic expansion and bull market."

 

MontyHigh, www.worldofwallstreet.us

Off Topic: Ghengis Khan Quotes

Ghengis Khan : “The greatest happiness is to scatter your enemy, to drive him before you, to see his cities reduced to ashes, to see those who love him shrouded in tears, and to gather into your bosom his wives and daughters."

COMMENT: Now we know where Conan the Barbarian got his to answer to the question: "What is best in life?"

Ghengis Khan: “It is not sufficient that I suceed - all others must fail.”

COMMENT: Quite a contrast to Jesus: "The Son Of Man did not come to be served, but to serve and give his life a ransom for many." The whole tradition of servant leadership (which we expect from our democratic leaders but have been failing to get lately), comes from Jesus.

MontyHigh, www.worldofwallstreet.us

Unadjusted Year Over Year: Labor Department Initial Jobless Fall 10.7%

Here's the scoop on the Labor Department's weekly initial jobs claims report:

• Associated Press Headline And Lead: "Jobless claims dip, spending up in sign of rebound... In a hopeful sign for the economy, the number of newly laid-off workers filing claims for unemployment benefits fell below 500,000 last week for the first time since January."
• Labor Department News Release: click here. 
• Key Numbers: "The advance number of actual initial claims under state programs, unadjusted, totaled 543,926 in the week ending Nov. 21, an increase of 68,080 from the previous week. There were 609,138 initial claims in the comparable week in 2008."
• My Spreadsheet (click Download 20091119yoy).

Here's my uneducated interpretation - Year-Over-Year initial jobless claims were significantly lower than last year. This means that fewer people are losing their jobs now than a year ago. This week, being around Thanksgiving, appears in the historical data to have quite a bit of volatility. Here's a way of looking at when unemployment might peak.

We are still 100,000 initial jobless claims a week higher in 2009 than we were in 2002 (see graph below), but are trending downward. At the current trend 2010 jobless claims should match 2003 jobless claims around the beginning June of 2010. 

The unemployment rate peaked in the previous recession in June of 2003 (at a measly 6.3%) (see Bureau Of Labor Statistics graph below). 

So, extrapolating from the current initial jobless claims relative to the 2001/2002 recession and the unemployment peak from the 2001/2002 recession, gives us an estimated unemployment peak for the current downturn of June 2010.

This is pretty crude, but at least it has a couple of graphs to back it up.

MontyHigh, www.worldofwallstreet.us

P.S., As much as I admire Karl Deninger's work, I find today's post where he questions the seasonal adjustment to be hysterical (without looking into earlier years to see where the seasonal adjustments came from) and to be a case where he is forcing his viewpoint on the data rather than letting the data speak to him.

Best Of The Web: Jesse's Cafe Americain

http://jessescrossroadscafe.blogspot.com/

Y'all are foller'in Jesse, right? I think his posts have consistently the higher quality, deeper insight without repetition than any other financial commentator (subscription or free).

Today's post (about the price of gold rising) is a perfect example: Gold Is Rallying Because...

MontyHigh, www.worldofwallstreet.us

A Rapidly Rising Price Of Gold Is Not Good

Its excellent for my own net worth but its bad in this sense:

A rapidly rising price of gold means the system is badly broken. It means, generally, there is nothing better to do with your accumulated wealth then to hide it somewhere. It means there are no good opportunities for investing in projects that produce genuine win-win value (improve overall conditions for the investor and the general population).

The last time the USA had a rapidly rising price of gold was in the 1970s a time when unemployment was high, the economy was not growing, inflation and high taxes where draining the standard of living and the Soviet evil empire was expanding its influence (Afghanistan, Nicaragua) and wearing down West Europe.

The price of gold peaked right about the time the combination of Volcker's interest rate rises and Reagan's deregulation and tough foreign policy "fixed" things somewhat.

I apologize for getting political. I am not a huge Reagan fan-boy, but as someone who lived thru the period I can say that conditions for the average guy got noticeably better after the price of gold took it on the chin and that things were looking scarier and scarier (and the economy was getting worse with no known path to improvement) up until the time the gold price peaked.

Today's problems are different from the 70s, but I don't see any signs of fixes yet and I expect things to get worse and the price of gold to continue rising. I'm actually looking forward to the day when I can move my portfolio out of gold and invest in something that provides win-win value.

I find today's gold price jump to be pretty scary.

MontyHigh, www.worldofwallstreet.us

My Stock Holdings...

Somebody asked me on a message board what I was holding. Here's my reply:

My Stock Holdings... In descending order of size in my portfolio. My retirement account is all-in these stocks (although I've got some diversification  with a lucrative, secure day job and paid off house).

I wish I had about four more names I really liked.

GORO.OB - excellent rocks, stock-holder friendly management, promising real dividends, reasonably politically secure (never meet their "targets", not enough NI43-101 resources).

OGC.TO - straight out undervalued on a price to annual oz basis. Didipio half-built mine is a hidden asset play.

TRY.TO - dividend paying gold miner with mines in Australia, Brazil and soon in Argentina. Very competent and stockholder friendly management, decent but not great rocks.

DMM.TO - great rocks, very undervalued in politically risky Ecuador (but rapidly trending less risky location). Seems to be having trouble getting the first mine working. The rocks are so great I'm willing to wait.

CGA.TO - straight-ahead, excellent sized (200K oz/year) gold mine starting up in the Phillipines. Little risk, very undervalued relative to peers, great institutional support, exploration upside in the Phillipines and an excellent 2nd mine candidate project growing in Nigeria. Quite a tasty morsel for a takeover.

SMF.TO - an undervalued mid-tier turn-around where they've been meeting guidance for about three quarters and are rapidly being revalued upwards.

FRG.TO - best Nevada advanced development project exploration company. Lots of good gold with more coming. Moving towards production. Very competent management.

MAI.TO - 49% owner of a producing gold/silver mine in Argentina. Very undervalued with great exploration upside and Rob McEwan as stockholder friendly CEO. Big downside is that the 51% owner (Hochschild) has ticked off the Argentine workers who are sporadically going on strike. I think it will turn around.

LMA.TO - has partial ownership of three marginal (IMHO) mines with Huge exploration upside at the Sudan (yuck) mine. Basically as self-funded exploration play in my view. Looks very undervalued as a producer, but I just don't like the quality of the producing mines.

XAU.TO - an explorer than owns half of one of FRG.TO's best projects.

That's it. Hope you find this helpful. At this point I'm pretty satisfied with each of my stocks, but wish I had more names as I remain overconcentrated in GORO.OB and OGC.TO. Do your own Due Diligence.

As time goes by I've been giving more weight to the stockholder friendliness of management (hard to judge, but important to get right) and having better than average rocks.

P.S., Having gold go up 2 days in a row while the dollar went up and the stock market went down with a option expiration day approaching is a pretty crazy-bullish divergence. Gold and my stocks are way overbought, but I think they are going to keep going nearly straight up for quite a while (say thru the end of the year). The fundamentals (supply vs demand) for physical gold seems really bullish. The indians were buying last night at $1145/oz. That means the price can't fall far as Indian buying will kick into high gear as soon as it starts falling.

MontyHigh, www.worldofwallstreet.us

On Topic, Very Funny: As Seen On TV

Year Over Year: China Electricity Consumption Grows 16%

If this data is reliable, it indicates that the Chinese economy is growing robustly.This data is kind of hard to find. The latest data point was, apparently, released in China (click here) on Nov 13, 2009 but came out in an English news story only today.

MontyHigh, www.worldofwallstreet.us

Unadjusted Year Over Year: Labor Department Initial Jobless Fall 6.57%

Here's the scoop on the Labor Department's weekly initial jobs claims report:

• Associated Press Headline And Lead: "New jobless benefit claims unchanged at 505K... The number of newly laid-off workers seeking unemployment insurance was unchanged last week, remaining above the level that would indicate the economy is adding jobs."
• Labor Department News Release: click here. 
• Key Numbers: "The advance number of actual initial claims under state programs, unadjusted, totaled 479,295 in the week ending Nov. 14, a decrease of 53,132 from the previous week. There were 513,000 initial claims in the comparable week in 2008."
• My Spreadsheet (click Download 20091119yoy).

Here's my uneducated interpretation - Year-Over-Year initial jobless claims were lower than last year significantly. This means that fewer people are losing their jobs now than a year ago. However, looking at the absolute numbers leads me to the conclusion that things are still getting worse, but not as quickly as last year. As you can see below, we are still:

• 200K lost jobs per week higher than "the good times" and
• 100K lost jobs per week higher than 2001 to 2003 Internet Bubble recression and
• It took at least a year (Q1 2003 to Q1 2004) at the end of the last recession to have initial jobless claims drop 100K. To me it looks like we are still at least a year away from having unemployment peak!.

However, here's what the AP says about how this number must change to get to the point where the economy is adding jobs: "While the steady decline in claims is evidence that firings are decreasing, most economists say weekly claims would have to fall to about 425,000 for several weeks to signal that the economy is actually adding jobs. Some economists put the number higher, around 475,000." The AP doesn't mention that we need to get to the point where the economy is adding at least 100K jobs/month to get the unemployment number to stop rising. So, this basically confirms my outlook that things are still getting worse as far as employment goes. 

P.S., I'm still monitoring various other economic numbers but am only posting entries when convenient as I haven't gotten any reader complaints about missing the industrial production, housing permits/starts and other posts.

MontyHigh, www.worldofwallstreet.us

Why The Downturn Seems A Little Unreal To Me

http://cohort11.americanobserver.net/latoyaegwuekwe/multimediafinal.html

Click thru and check out this animated unemployment map. Most stunning thing I've seen recently.

I read about how bad this is and then look at traffic, restaurants, etc. where I live and it seems unreal. I guess this is why.

I'd be pretty ticked if I lived elsewhere and saw how the DC metro area is faring relative to the rest of the country.

How is your home town?

MontyHigh, www.worldofwallstreet.us

Not Off-Topic: What The "Khalid-Sheik Mohammad Trial" Is Actually About

If its not clear to you already, its time to get real about the American mainstream media. They exist to distract the American populace. They want to deliver eyeballs to their advertisers while keeping those eyeballs off the subject of how their bankster overlords and they (and I'm not sure who else) are really running things for their own benefit.

Seems pretty clear to me that this whole KSM trial is being timed to be a major distraction to allow a classic doves/hawks food fight distract the population from the fact that nothing has been done to fix the economy or punish the banksters who caused the downturn and that just about every one of the congressman and senators are bought and paid for by the banksters (and their allies).

The way I look at it is: "If the mainstream media is covering a subject closely then its not really what you really should be paying attention to." I consider this to be "on-topic" because its only by finding out what's really going on that you can make investments that will produce real returns.

MontyHigh, www.worldofwallstreet.us

Minera Andes (MAI.TO), Both Sides Of The Story

Here (click here) is a recent, tell-the-positives-only message board post telling the Minera Andes (MAI.TO) story:

"Mineas Andes-setting the table for big upside

Go to the website thru google finance and just enjoy reading all the positives with this company. It found a rich ag/au deposit now called the San Jose mine, which has 15 OUNCES per ton ag and 6.6 g/ton au; and is making money with it's 49% ownership of that mine. It discovered and has brought to a pre-feasibility study stage one of the world's richest cu deposits which has a NPV of $3 Bill with cu at 2.90/3.00 pound. The total deposit is expected to produce 11 billion pounds of cu, and may due so with open pit mining.

It has precious metal veins and seams that are undergoing, or are about to undergo, more definition drilling. All of which are 100% company owned.

Best of all it has a principle stockholder (33% of company bought at $1C price) who is CEO that has a GREAT business history as the founder of Goldcorp, and who is taking NO SALARY and he levels with his fellow stockholders. His name, you may recognize, is Rob McEwen. The Yahoo board is actively discussing this company; and you will be thrilled with the company website.

All of the assets are in Argentina which is now a stable, relatively fully predictable environment.

Straight lining the lastest qtrly earnings report and using a 20 multiple gives me a $1.6 price level for the shares. The sell today for 65 cents US. An amazing baseline and wonderful bargain."

Here's some negatives that aren't mentioned:

• The operator of their 49% owned mine (Hochschild) has managed to tick off the workers in Argentina where strikes are a respected and ongoing tradition. McEwan has already indicated that Q4 production / earnings will be down due to labor actions that have already occurred.
• The operator of their 49% owned mine (Hochschild) is operating the mine in strictly its own interest and it may be a long time before Minera Andes gets any actual cash-flow from the mine. It will be even furtherout, if ever, that stockholders get a slice of that cash-flow in stock-buybacks or dividends.
• XSTRATA, which knows more about mining copper in Argentina than anyone else, decided not to buy into that "3B$ NPV" copper project at triple the exploration cost to date. I'd call that an indication that the project isn't anywhere close to that 3B$ value. 

Still, the poster is right that the 49% owned mine is a great asset. I estimate a price to operating cash flow from that mine for 2010 at $1000 Au and $16 Ag at 2.1 making MAI.TO (leaving aside the copper project and other exploration project values) roughly undervalued relative to its peers (e.g. Minefinders [MFL.TO/MFN] by a factor of something like 3 to 1.

I bought back in yesterday at $C.67 (only 1% of my portfolio) because I'm a value investor at heart and it seems, even with the negatives above, way too undervalued.

MontyHigh, www.worldofwallstreet.us

Year-Over-Year: Industrial Production:-7.8%, PPI:-1.9%, Retail Sales:-1.7%

Don't have time to do the usual full write up.

My quick thoughts are:

• Retails sales at -1.7% vs -5.4% and worse for earlier months is a clear improvement.
• Producer Price Index at -1.9% vs -4.8% and worse for most earlier months indicates that classic deflation is fading away.
• Industrial Production at -7.84% vs -8.4%, -10.4%, -13.2% and higher for earlier months indicates that industrial production is improving but not as fast as one might wish.

Overall, I'd say this explains why the "reflation" trade is on and why it remains a risky trade with stock market valuations factoring in future inflation.

Will try to get back on the wagon with full reports for upcoming numbers.

MontyHigh, www.worldofwallstreet.us

Apollo Gold 10Q Review

Apollo Gold, one of my holdings, posted their quarterly results yesterday. I look at Apollo Gold as a value investment, specifically as a speculative turn-around play. The story is as follows:

• Apollo Gold was a reasonably successful mining company with a gold/zinc mine in Montana which became depleted.
• Apollo Gold has a nice property (Black Fox) in Canada with good, but not fantastic gold grades and they have opened a mine which starts as an open pit mine which is to be supplemented with underground production starting next year. By the way, they have excellent exploration upside (with some drill results that are comparable to Black Fox) immediately adjacent to Black Fox.
• Apollo Gold had to get financing for the new mine around this time last year at the heart of the credit lockup. The stock price fell to around 1/5th its current value. They managed to get financing without too much dilution, but with pretty hefty interest rate payments (around 8% interest) and hedging 1/4 of the next four year's production at $875 gold. CAD$ / USD$ currency risk is also hedged.

So, the key part about the turn-around play is, Apollo Gold must get Black Fox working well enough to pay off that debt or bad things happen (initially in the form of hefty dilution) to stockholders. The thing to watch, in my view, is the amount of gold being produced, the cost of production, the cost of gold (of course) and the balance sheet's current assets.

During Q3, there was a production hiccup, where the grade of ore run thru the mill did not match expectations. The reason why I'm an Apollo Gold investor is because I was very impressed by the way management handled the hiccup. They were very straight-forward about what happened, provided a tonne of technical detail in a way that showed that they loved mining and know it backwards and forwards and that they knew what the problem was and how to fix it. Quite a contrast to many other companies. New Guinea Gold (NGG.V) comes to mind as the exact opposite.

So, that brings us to the 10Q. I'm not a finance / accounting guy. I'm a software engineer who is trying hard to spin up on his investing skills. I realize that a major step forward in increasing my stock-picking skills is to be better able to interpret financial filings. Here's what I see.

Balance Sheet:

Total Current Assets: 22.6M$, Total Current Liabilities: 53.2M$... Yikes, that's why this is a speculative stock. But of the current liabilities, 8.6M$ is derivatives (gold hedges). That's not a problem. The big hitter is "Current portion of debt (25.8M$)". Leaving those aside, Apollo Gold is in reasonably good shape.

Digging into "Currrent portion of debt (25.8M$)" in note 8a, we see that the project facility (the debt) has to make monthly interest payments and "repayment of the principal amount in unqeual quarterly payments". Apollo Gold missed the first principal repayment (yes, this is a speculative investment). The banks have agreed to defer payments to allow the banks to "complete an ongoing technical review of the Black Fox project with the object of rescheduling quarterly repayment installments". The entire debt is to be repaid by Mar 2013.

So, as far as the balance sheet is concerned, I conclude that the banks are happy getting the Libor plus 7% payments on the debt (with decent principal repayment) and things will get the financing worked out provided the mine produces relatively ok.

The total debt is 67.65 and interest payments at 8% / year is 1.35M$/quarter.

Income Statement, Etc.:

Black fox produced 19,848 oz in Q3 and is guiding for 20K oz in Q4. With this in mind, let's look at the income statement. 

Revenue was 19.1M$ or 962$/oz. That sounds right. Summing Direct operating costs, General and administrative expenses, we get a "cash-cost, including G&A" of $630/oz.

This means that going forward into Q4 with gold averaging, say $1050/oz and 1/4 hedged at $875, Apollo Gold should have an average sales price of gold of $1,006 /oz. 

So, at 20K oz for Q4 with the above sales price and the same "cash cost", Apollo Gold should net 7.5M$ operating cash flow. This would allow them to easily make the 1.35M$ interest payment on the debt as well as make a substantial principal payment. Production is expected to increase by 11% in Q1 2010 (or more with increasing gold grade). Equal quarterly principal payments to complete principal paydown in Mar 2013 (14 payments) would be 4.83M$/quarter. Together with interest, debt repayment (with equal payments) for Q4 is = 6.19M$, leaving = 1.34M$ for exploration, misc and contingencies. 

Factoring in a falling cash-cost (as the mine is optimized) and increased production (with mill thruput increases and with higher-grade underground ore), Apollo Gold should be able to have greater margin against debt repayment going forward.

CONCLUSION: Apollo Gold should be able to make its rescheduled debt payments, but there is little margin for error for the next couple of quarters. Apollo Gold is a speculative investment that depends on management competence. It should be highly leveraged to the price of gold and to meeting (or missing) management guidance. I don't think that exploration success is that significant over the next two or three quarters.

I'm not really that expert at this kind of analysis, but I'm trying to improve. Tell me what I'm missing. There could be out and out mistakes. Do your own due-diligence.

MontyHigh, www.worldofwallstreet.us

Best Of The Web: Ambrose Evans Pierce on US / China Relationship

(click here)  "It is fashionable to talk of America as the supplicant. That misreads the strategic balance. Washington can bring China to its knees at any time by shutting markets. There is no symmetry here. Any move by Beijing to liquidate its holdings of US Treasuries could be neutralized – in extremis – by capital controls. Well-armed sovereign states can do whatever they want.

 

If provoked, the US has the economic depth to retreat into near autarky (with NAFTA) and retool its industries behind tariff walls – as Britain did in the 1930s under Imperial Preference. In such circumstances, China would collapse. Mao statues would be toppled by street riots."

 

What think ye? I think either nation could put a big hurt on the other. I think both better get to work on putting their houses in order.

 

MontyHigh, www.worldofwallstreet.us

Off Topic: The Rule Of 27

What do you make of this piece? http://isteve.blogspot.com/2009/11/jodys-hbd-magnum-opus.html 

What I found of value is summarized in this quote: "the rule of 27. that is to say, almost all musicians, athletes, and math-based academics perform their best work at or around age 27, and then begin to decline until at about age 40, at which point they no longer produce any important work."

Has a lot to say for my children, nieces and nephews about not farting away their most creative years (and leaves a rather dismal outlook for myself at 53). 

What do you think? I think investing is an old-man's game and most achieve the top of their game over 40. What other areas are there for the over 40 crowd where the verse "grow old with me, the best is yet to be" applies?

MontyHigh, www.worldofwallstreet.us

Outlook For Next Week

Ok, they schwacked the stock market (and ramped dollar) today because they were selling the 30 year treasury bonds and wanted to make 30-years look like a good investment. So, what's coming up (click here and here)?

No news tomorrow.

Monday - retail sales, empire manufacturing and business inventories (8:30, 8:30 and 10AM). Are we feeling lucky? Recently, numbers of this kind have been considered "better than expected" and the stock market has risen. If it doesn't then perhaps the reflation trade is over.

Tuesday - producer price index, TIC flows, capacity utilization and industrial production (8:30, 9:00, 9:15, 9:15). Same outlook for me as Monday.

Wednesday - housing starts, building permits, CPI (8:30, 8:30, 8:30). I'm guessing these numbers will be bearish. CPI should be going positive either this month or next month based on rising commodity prices.

Thursday - initial jobless claims (every week), leading indicators and Philadephia Fed (8:30, 10:00, 10:00). Same outlook for me as Monday.

No long-dated treasury options.

Overall, I think next week is a week for continued "reflation" trade (stocks, gold, commodities) strength.

We'll see.

MontyHigh, www.worldofwallstreet.us

Unadjusted Year Over Year: Labor Department Initial Jobless Down 2%

Here's the scoop on the Labor Department's weekly initial jobs claims report:

• Associated Press Headline And Lead: "Jobless claims fall more than expected to 502K... New claims for unemployment insurance fell more than expected last week, evidence the job market is slowly healing as the economy recovers."
• Labor Department News Release: click here. 
• Key Numbers: "The advance number of actual initial claims under state programs, unadjusted, totaled 529,446 in the week ending Nov. 7, an increase of 46,904 from the previous week. There were 539,787 initial claims in the comparable week in 2008. "
• My Spreadsheet (click Download 20091112yoy).

Here's my uneducated interpretation - Year-Over-Year initial jobless claims fell for the first time since the start of the downturn. This means that fewer people are losing their jobs now than a year. However, looking at the absolute numbers leads me to the conclusion that things are still getting worse, but not as quickly as last year. As you can see below, we are still:

• 200K lost jobs per week higher than "the good times" and
• 100K lost jobs per week higher than 2001 to 2003 Internet Bubble recression and
• It took at least a year (Q1 2003 to Q1 2004) at the end of the last recession to have initial jobless claims drop 100K. To me it looks like we are still at least a year away from having unemployment peak!.

 


MontyHigh, www.worldofwallstreet.us

Dollar has a 74 handle now...

Its breakdown is continuing.

Deflationists appear to be wrong. Stagflationists and perhaps hyperstagflationists seem to be on track.

 

Copper inventories are rising fast and yet the price of copper continues higher. This seems to deny the law of supply and demand (the fundamentals) until you realize that the supply of dollars is rising faster than the supply of copper.

 
I'm positioned right to benefit from this, but its pretty darn scary none-the-less.
 
At least with the Internet Bubble you knew that something dramatically productive and life-changing for the better was happening even if it was overvalued. No such reassurance here. Instead we see markets going up when based on the raw fundamentals they should be crashing. This will end in tears.
 
MontyHigh, www.worldofwallstreet.us

Could The Markets Close For Months?

Click Here For The Sound Bite

Click Here for the 2 minute audio excerpt from "The Ascent Of Money" DVC [which I recommend]

What would happen to leveraged trades if they did? What would happen, for example, to futures (or options) if the markets closed like this? A major warning against the use of leverage.

Now that was a black swan.

MontyHigh, www.worldofwallstreet.us

Best Of The Web: Ritholtz InfoPorn...

This downturn looks L-Shaped to me from this graph. The state taxes graphs (click here) are worse.

MontyHigh, www.worldofwallstreet.us

Best Of The Web: Dangerous Side Effects of Ultra-Easy Money, Gary Dorsch

http://www.sirchartsalot.com/article.php?id=117

Ok, I read hundreds of pages of this kind of stuff every week. The above is the best such "piece" I've seen in a while.

The graphs (best viewed in color) clearly show that the correlation between money printing and the stock (and gold) price rise off the March lows. As far as the inflation / deflation debate goes, here's some real facts that very strongly show that inflation is real and accelerating. 

Here's an example of one of something like five very telling graphs. Isn't it cool the way he gets so many different data sets in one graph and what you can learn by seeing them all in one panel?

MontyHigh, www.worldofwallstreet.us

Best Of The Web: Robry's Weekly Take On USA Industrial Activity

Tired of getting opinions on the economy or government spun economic stats and want something based on true facts? I suggest you start tracking Robry's blog (click here). This guy is quite a methodical/gifted number cruncher who models the natural gas market (based on nightly numbers he gets from who knows where) and posts his results on the Investor Village CWEI board every night (click here for the first of one of his nightly multiple posts). He predicts the natural gas weekly numbers better than any other known source. 

Once a week he posts on his blog what he sees regarding USA factory natural gas consumption (for which he gets nightly numbers). He was the first buy to have actual facts indicating that USA industry had stopped contracting and started expanding. His read has got to be at least 2 weeks (and probably 4 or more weeks) more timely than any other information you can get.

Let me know what you think,

MontyHigh, www.worldofwallstreet.us

FWIW: Hedges Came Off This Morning At 2AM

Lost a bundle on the hedges, but more than made up for it price pops of what was being hedged. 

We are clearly (to me) in some kind of "to the moon" liquidity driven / inflation anticipating / earnings don't matter much market move. Who knows how far it can go, but I bet it can go a long ways as the big banks will all go bankrupt if they can't reinflate the assets underlying the non-performing loans. I'm pretty afraid at what the ultimate outcome of this will be.  

 

I'm back to 100% invested in Jr producing gold miners (well a couple of percent in explorers). Top holdings are GORO.OB, DMM.TO (may lighten as CEO sold some on Friday), OGC.TO, TRY.TO, CGA.TO, APG.TO, SMF.TO and LMA.TO.

 

Obviously this is not for everyone, but the gains to date have been substantial and the 2010 estimated typical price operating cash / flow at $1000/gold is under 3 while the same for comparable well-known miners (such as those held by Northbeach2000) is are around 6. That's my margin of safety, such as it is.

 

Best wishes and do your own due-diligence,

 

MontyHigh, www.worldofwallstreet.us

P.S., I'm finding that I have less of a need to express myself via blogging while my confidence and investing abilities appear to be growing. If you let me know, dear readers, what kind of material you have found to be of value this web site... I will try, out of the high-state of service, to keep that kind of material coming.

Unadjusted Year Over Year: Labor Department Initial Jobless Claims Up 3%

Here's the scoop on the Labor Department's weekly initial jobs claims report:

• Associated Press Headline And Lead: "New jobless claims drop to 512K, lowest since Jan.... The number of newly laid-off workers filing claims for unemployment benefits last week fell to the lowest level in 10 months, evidence that job cuts are easing as the economy slowly heals."
• Labor Department News Release: click here. 
• Key Numbers: "The advance number of actual initial claims under state programs, unadjusted, totaled 480,178 in the week ending Oct. 31, a decrease of 14,216 from the previous week. There were 466,341 initial claims in the comparable week in 2008. "
• My Spreadsheet (click Download 20091015yoy).

Here's my uneducated interpretation - A better than usual data point. Someday soon I expect we'll have a positive year-over-year number. But it still seems to me that initial jobless claims indicate that unemployment is still rising and will continue to rise for some time.

MontyHigh, www.worldofwallstreet.us

P.S., its not worth mentioning because it happens every week, but even though things are getting worse (initial jobless claims indicate that unemployment is still rising), AP insists on assuming that things are getting better.