Time to Find Investment Opportunities

Originally posted on June 30th at argmaur.blogspot.com

As anticipated, our mining stock picks have settled near support levels and have signaled an imminent reversal. The recent downturn in the sector preceded that of the entire stock market last week. To be clear, the banks have caused the market decline through bad investments and unfortunate timing. As aforementioned last week, the current “bank run” is in full swing and not nearly over.

- Analysts Backtrack on Banking Stocks After Saying Worst Is Over – Bloomberg
- Financial Firms May Make Deeper Cuts, Eliminate 175,000 Jobs – Bloomberg
- S&P Cuts Bank of America to Sell from Hold

The banks and the financial news providers will have you believe that we have an overall bad economy—which just isn’t true. We’ve previously suggested that the economy is expanding, production is growing, and American companies are doing better abroad; take a look at these news items:

- US Economy Expanded Faster than Reported with First Quarter GDP Revised Upward to 0.9% – MoneyMorning
- Cost-Cutting Helps Walgreen Raise Profits 2% – New York Times
- GM, Ford Will Export More Cars to China – Yahoo! Business News

Again, precious metals supply levels are being severely tested and the consequences of such actions are explosive prices in the long-term.

- Australia Gold Output Falls 7 Percent in 12 Mos. – Reuters
- Standard Bank (South Africa) and ICBC (Industrial and Commercial Bank of China) Cooperate in Precious Metals Market – Trading Markets.com
- Platinum trading begins in Tokyo, Platinum ETF in Zurich, and a report that Nanomotors with platinum may increase speed – Platinum Today

Precious metals and commodities prices have maintained their support levels despite the actions of mining stocks. Most notable, gold’s price quietly marched pass the $900 level and is on its way to $950. Nonetheless, our major observation was the major mining stock divergence from the stock market. When the major indices tumbled last week, we bore witness to a rise in mining stock prices. Should the diverging trend continue, it will positively impact the mining sector.

Run from the Banks!

Originally posted on June 20, 2008 at argmaur.blogspot.com.

Yesterday marked a full moon and, contrary to our forecasts, our mining stocks did not see cycle highs. Instead, they moved sideways and even decreased slightly over the past 2 weeks. You needn’t worry about recent mining stock behavior as it’s signaling a change in cyclical patterns. The change will likely produce cyclical highs near the new moon and lows near the next full moon—a pattern contrary to what we’ve seen over the past year. Of course, it’s not a coincidence that this change is occurring on this year’s summer solstice!

The best thing to do is to monitor technical charts, detach yourself from your urges to sell, and practice patience even if it hurts! If you haven’t yet bought, then the best buys are RBY (Rubicon Minerals between $1.15 and 1.25), ROY (International Royalty between $5.20 and 5.70), ANO (Anooraq between $2.85 and 3.00), and AGT (Apollo Gold between $0.54 and 0.60).

The reason you should hold is because we’re presently witnessing a run from the banks unlike anything we’ve seen in most of our lifetimes. Just look at the following news items from the past 2 weeks:

This Week:

- “Wealthy Investors Shift Funds From Global Banks to Reduce Risks” in which head of Wilmington Trust Corp. said “For the first time in my career, I saw concern about the location of one’s assets.” (Bloomberg Article)

- “UBS Clients Probably withdrew CHF41 B ($39 B in Assets” (Bloomberg Article)

- “RBS Issues Global Stock and Credit Crash Alert” telling clients to “brace for a full-fledged crash in global stock and credit markets over the next three months as inflation paralyses the major central banks” (UK Telegraph Article)

- “Russians Withdrew $55 B from European Banks” which was the first time they withdrew since 2003. (Kommersant Article)

- “Iran Withdraws $75 B from Europe.” A possible, although denied scenario to prevent blocked assets as part of the West’s threats of sanctions. (Reuters Article)

- Total bank losses and write-downs may amount to $1.3 TRILLION (Bloomberg Article)

- “Morgan Stanley’s Quarlerly Profit Fell 61%” (Washington Post Article)

- “Morgan Stanley Warns of ‘Catastrophic Event’ as ECB Fights Federal Reserve” (UK Telegraph Article)

Last Week:

- “Watchdog Feared a Run on B&B” which discusses how the British Treasury and Bank of England are concerned that mortgage bank, Bradford & Bingley’s might end up like Northern Rock last fall (UK Guardian Article)

- Central Banks express concerns over heightening inflation , signaling rising interest rates are imminent. Are the rate hikes actually a way to attract money to banks?

- “Central Bank Body Warns of Great Depression” discusses a warning realeased by the Bank of International Settlements based in Basel (Banking Times Article)
A financial consultant had it right when he expressed client sentiment and said, “If UBS, ‘the Rolls Royce of the industry’ can’t manage its own capital, then what the hell are they going to do with mine?” That sums up our opinion exactly!

It’s worth mentioning that this new “bank run” follows the panic over both Northern Rock and Bear Stearns, in which clients withdrew $4B and about $10 B respectively (and after both incidents, precious metals surged). That’s peanuts compared to what’s going on now. The only difference is that the media is remarkably silent about our present bank run. If this trend is legitimate, then all that money from the banks has to go somewhere else. It will go to precious metals—a timeless safe haven.

Who Needs Another Rate Cut Anyway?

This week brings a new moon, a new trading month, and a new upward trend for precious metals. Instead of focusing on the Fed’s decision to leave rates untouched, think about its intention to tame the inevitable upward momentum of precious metals.

Today we found more indications that point to gold’s positive long term direction. George Soros also thinks the crude oil market is overbought and if he’s right, and it’s hard to doubt a billionaire investor, the money in oil investments needs to go somewhere else. The banks are still reporting losses, with news of Wachovia’s CEO firing, and analysts expect a profit loss for Lehman. Furthermore, the housing industry is still in decline, airlines are having serious financial difficulties, and automakers are reporting slower sales. Apart from investing in precious metals, there really aren’t too many other high-yielding alternatives.

In our last commentary, we discussed how rhodium and platinum supply concerns are going to push metals prices higher in 2008. While rhodium and platinum have already surged, Gold is up by only 5% this year. Well, our predictions about gold supply concerns were affirmed this morning. South Africa, one of the world’s main precious metals producers, reported that gold output fell by a whopping 15.6% during the first quarter.

Undoubtedly, this new moon will take mining stock prices significantly higher.

This morning, RBY (Rubicon Minerals) showed signs of reversing the downtrend that began along with a full moon just 2 weeks ago. This morning, its price dropped down to $1.24 before quickly bouncing back to 1.35. If anyone picked up shares below 1.30, then consider yourself fortunate. Presently, RBY is following the moon’s trend with precision and expect prices near $1.60 by this month’s full moon.

AGT (Apollo Gold) had done quite well between a $0.60 to .61 support range, but dropped today to about .59. Expect upward momentum tomorrow or by Thursday at the latest. The stock should increase to about $ 0.70 in two weeks.

Oh ROY! The metal royalties stock saw its largest increase in months after our May 13th buy alert. All the investors and traders who doubted International Royalty Corp got quite a surprise during the start of last week’s downward momentum. Its price corrected from about $6.00 to about 5.79– just above its 200-day moving average. Expect more sideways action this week and a reversal next week along with ANO. Certainly wait until next Monday or Tuesday before buying.

ANO (Anooraq Resources) is still in the midst of a downtrend and we could see continued negative momentum until we reach a price level between $ 3.10 and 3.15. It lags RBY and the moon’s trends by almost a whole week, if not more. Expect movement between $3.20 and 3.30 for a few days, but wait until its price moves below $3.20 before entering.

PLG (Platinum Group Metals) recently saw one of its largest single-month increases in years. Its price increased from about $ 2.20 to 3.30 or nearly 50%. It has corrected to around $3.04 but expect further downward momentum as this stock’s trend is even lagging ANO and ROY. The stock should settle at a support level between 2.60 and 2.80 by next Wednesday or Thursday at the latest. PLG and ANO are two of the only platinum stocks on the AMEX, but we don’t usually trade the former because it just doesn’t have enough volume. Low volume could mean difficulty filling your buy and sell orders.

Remember that every stock’s trend is unique and nothing is perfect. Although negative news is bound to surface, technical indicators and market fundamentals point to higher metals prices in the end.