Spent the last two days meeting with companies, financiers, financial advisors, etc. In over twenty years in and around the junior resource market, I’ve never seen more gloom and lack of any real optimism among industry players. There’s little doubt that severe damage has occurred and there will be no quick fixes. I’ll discuss this more in the next couple of weeks.
The U.S. stock market is simply correcting an extremely oversold condition while extremely bearish economic numbers continue to pour out. I would love the DJIA to rally back towards 10,400 as it would be a gift to go short again, but I suspect this bear market rally may top out as early as next week.
I’m concern about gold. Despite strong Asian and European buying, gold falls sharply on the Comex, especially after London closes. We can speculate that a group or groups is influencing the downside but we’re going to have to hold $700 and get back above $800 to turn the technical picture bullish again. A top again in the U.S. Dollar could help the bullish cause so next week’s trading needs to be watched closely.
The U.S. elections next week are all but certain to effect the outlook for all U.S. markets. I’ll discuss what I see the ramifications may be after the election.
Speak to you again on Monday
God Bless,
Peter
Peter,
A recent article from the Dow Theorist Richard russell states : “Things are looking better. After a series of 90% down-days, we had a 90% up-day on Tuesday, October 28. Since then, the market action has been fairly good. With bonds appearing to have topped out, I’m beginning to think that there’s a fairly good chance the market has bottomed. Adding to the bullish case, Lowry’s published a significant contraction in selling pressure today.”
If he’s correct has capitulation occurred and have we turned the corner to the next bull market? If no, why?
Superstar
Peter,
I am half way through the book “The Creature from Jekyll Island”…wow; you would think he wrote yesterday. Author G. Edward Griffin sure spells out the past and present mess we are in. We little people do not have much of chance other than to anticipate there evil moves. Should the world ever recover this presnt financial storm and once again have a need to ever build things again, we will need commodities. Thankyou Peter for being there suggesting companies with some honesty and market value.
Bill
Jesus is Lord
Peter:
I’m a new member to your webpage and blog. I met you for the first time today (Nov. 1/08) at the conference in Vancouver. Your talk was informative. I wish I had known of you and your blog a year ago…especially your blog (alert) of Oct. 14/07. My misfortune. Water under the bridge, I guess. What I’d love to know is where do we go from here?
I’m most concerned over an edlerly relative who has been invested in the market for only the last 10 years and has lost approx 20% value in her portfolio to date. She is concerned because this is the bulk of her savings. She is debating on a course of action (sell out now or hang on a bit longer). Selling now would be a bit like closing the barn door after some of the horses have already gotten away, but is it too late to close it anyway (i.e. sell off her investment holdings)? There has been talk of some rallies in the near future during this bear market. Should she hold on a bit longer to catch a rally or two before selling or get out now while she can? From what I heard in today’s Vancouver conference, the market future is not looking to bright. I would live to advise her on the right direction. Your perspective would be appreciated.
I will endeavour to catch your future blogs on a daily basis.
Steve
Though large scale money is being pumped in the system, but it would not be enough to cure the asset deflation. Asset price is a function of allocated liquidity. One can argue that its becoz of intrinsic factors like cash flow for stocks and marginal cost for commo , is what determines price. But I believe those are drivers and not price level determinants.
Now the allocated liquidity is a summation of cash and leverage on that cash. As people become risk takers, proportion of leverage liquidity vis-a-vis cash liquidity increases. What we saw at the peak of this credit bubble was a gigantic tower of leverage liquidity. Now that leverage is collapsing fast, and as it does, it is not only creating a vicious cycle for itself but also for asset values it supports.
Now when we sit down and ascertain what to buy and what gains to expect, we should not get carried away by historical price points becoz unless that kind of COWBOY LEVERAGE is coming back, asset prices is here to see large scale de-rating for some time to come…. Like what we saw in Japan….
Now what the governments around the world is trying to do is replace some of that leverage liquidity with cash liquidity.But it shall be of little help becoz financial liquidity is function of trust and faith in the counter party, but with such deleverage, that trust and faith is rapidly diminishing. Hence, what becomes, is a Gigantic Liquidity Black Hole, sucking up funds from govts and Central banks……
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I keep hearing this term, that stock markets have dropped to levels of 2003-04, in some cases to new lows, like Japan… But then it occurs to me that what happened post tech-bust was nothing but an effort to short-circuit the normal downturn and post-bubble adjustment. The shock and awe effect of heavy steroid punch only gave a 5 year of unsustainable boost, w/o curing the problem. Once the boost got over, the patient was found to be even more seriously ill. So a move back to 2002-03 level for some, and below that for others, would be a completion in that natural adjustment process…
Peter, when it comes to the resources sector, I’m actually encouraged by what is going on right now. The fact of the matter is that we had far too many resources companies listed on the TSXV. Much like condo developers, promoters overbuilt the market and the supply glut is now going to vanquish companies whose sole purpose was promotion over fundamentals.
In fact, I wrote about the very need for this back in April of 2008 http://blog.agoracom.com/2008/04/03/3-way-junior-mining-consolidation-is-pierre-lassondes-peanut-butter-manifesto/
The sooner we can clean house, the sooner we can concentrate investment into a smaller but better group of companies that will be poised to take advantage of long-term global resources demand.
Regards,
George