to the moon , Alice.
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to the moon , Alice.
by Jim Puplava
As an investment, it isn’t on anyone’s radar screen, at least not on the screens of the general public. Yet in the last three years, the price of the yellow metal has risen 54% from its nadir of $255.55 on April 2, 2001 to today’s 7-year high of $394.45. The last time we saw gold prices this high was back in May of 1996. The movement in the price of the metal is nothing compared to what has happened to the price of gold shares. The Amex Gold Bugs Index (HUI) has soared by an incredible 440% since January of 2001. The index is up 82% over the last 52 weeks and has surpassed even the gains in the NASDAQ this year. The HUI is up 53% this year compared to 47% for the NASDAQ.
For the first time in many years, the price of both precious metals are moving up in tandem. In Nymex trading today, the price of silver rose sharply right on the heels of gold’s strength. December silver jumped $.25 to $5.31. With the price of gold edging closer to taking out the $400 level, it looks like silver will be challenging $5.50 level. The rise in silver is now confirming the rise in gold.
The rise in metals is also mirrored by the price of most commodities. Since hitting a bottom in March of this year, the CRB Index has advanced nearly 25 points for a gain of 11%. Individual commodities have done even better. The price of crude oil has moved from just slightly under $25 in January to today’s price of $31.28. Soybean prices have moved from a low of $507 in January to a price of $769 today. Base metals are also moving with copper prices challenging $0.95.
Wall Street analysts and anchors dismiss the price rise in commodities as just a passing fad. The movement in the price of gold is explained by the fall in the dollar and the rise in oil by the Iraq war. However, the Iraq war ended six months ago and the price of the dollar has been confined to a narrow trading range between 92-98 since mid June. If the war and the dollar are used to explain the rise in the price of gold and oil what explains the rise in price of copper, platinum, soybeans, wheat, cotton, and cattle this year?
What's The REAL Reason?
There is something going on here and it is more than just the price of the dollar. Demand for commodities has been rising each year and most commodities are running a supply deficit. The real driving force behind the rise in commodity prices is demand. The other driver is the value of the dollar.
Energy Demand
However, demand growth will ultimately become the biggest driver of commodity prices over the long run. Demand growth is coming from Asia and especially China. For example, demand from Chinese steel makers is lifting prices for iron ore in most major markets around the globe. The Chinese appetite for commodities has become insatiable. In the area of energy, China’s demand will more than double by the end of the decade. The daily consumption of oil globally will rise from 75 million barrels per day (mbd) to 89 mbd by 2010. World energy demand will consistently rise by 1.6% a year.
World Oil Demand
2000
2010
2020
2030
75 mbd
89 mbd
104 mbd
120 mbd
Source: International Energy Agency (IEA), World Energy Investment Outlook 2003, p. 181
Precious Metal Supply Deficits
On the gold and silver side, supply deficits have been going on now for well over a decade. This will be the 14th year that silver has run a supply deficit. Gold has been running a supply deficit equally as long. If it hadn’t been for central bank sales of gold at rock bottom prices, the price of gold would have been much higher years ago. However, the supply of gold in central bank vaults is now half empty. In the case of silver, aboveground stockpiles are being depleted in order to meet supply deficits and those stockpiles are becoming thinner and thinner each month. The only way to keep gold and silver prices down in through the paper markets in derivatives. That won’t work in the long run because the big boys have been buying for the last three years. That is what has driven up the price.
We are only in the first phase of this new bull market in metals. Institutional interest is nominal at this point and individual investors are content chasing tech stocks at exorbitant prices. As an investment, gold and silver investments are the furthest thing on investors' minds at the moment. Individual investors are still chasing the last bull market in equities, believing that a new bull market has arrived.
Climbing Aboard
Gold and silver investors have been having a feast over these last three years and the bull market has just begun. There is going to be a tidal wave of new money flowing into this sector as smart money managers around the globe move billions of new capital into the sector.
Exploration Budgets Increased
Already this year worldwide exploration budgets are up 26% after five years of consecutive declines. Much of this money is going into junior mining and exploration companies. That is where the big payoff is going to be in this new bull market. The shares of junior mining companies are up 100-200% this year as a group with some companies up as much as 2,300%. Junior mining and exploration companies have been doing the lion's shares of exploration over the last few years. However, the major mining companies are increasing their budgets, recognizing the dearth of new projects moving into the pipeline. Newmont Mining recently raised $1 billion in new equity to pay down debt and finance future acquisitions. The company is going to have to find and replace nearly 8 million ounces of production each year, which isn’t easy. One way to replace those reserves is through acquisitions.
Canada Leads
Mining experts believe this year’s increase in exploration budgets from $1.73 billion to $2.19 billion reflects the slowdown in industry consolidation. From 2000-2002 a number of mining companies disappeared through mergers and acquisitions. This absorbed a major portion of exploration budgets. Junior mining budgets are also rising by as much as 25% this year over last year reflecting higher bullion prices and improving investor sentiment. Most of the improvement in investor sentiment is coming from Canada as a result of the flow-through of tax rebates to investors for funds raised for domestic exploration. Canada’s share of exploration reflects almost 50% of this year’s exploration budget.
Global and Canadian exploration budgets are expected to increase next year at a high rate and remain high for at least the next two years as the price of gold, silver, copper and nickel remain buoyant. Higher prices are attracting new investment dollars as mining companies sense that a new bull market has begun for precious and base metals that has years to run. Even if exploration budgets prove to be fruitful, it will be 5-7 years before much of that new supply comes on board. In the meantime, demand for both categories of metals continues to grow at an accelerating rate driven by demand from the developing world, especially China and currency debasement which has yet to run its course. The U.S. dollar could eventually fall to as low as 80 on the charts and even lower if budget deficits and trade deficits don’t improve.
The Stealth Bull Market in Metals
The best thing about this new bull market in metals is that it has just begun and nobody has noticed. You won’t find gold on investment recommendation lists. It isn’t on the cover of investment magazines. It doesn’t make the front pages of the local newspaper and it is barely mentioned on BubbleVision. Most investors don’t understand the bigger monetary picture nor are they paying attention to what is going on in Asia and China, India, or the Middle East when it comes to demand and supply fundamentals which are the primary driver of this new bull market.
Like 1999 and early 2000, investors are chasing the price of Internet shares and tech stocks and paying astronomical prices to buy what is essentially a slow growth, cyclical commodity business. The little guy is buying what he doesn’t understand and paying exorbitant prices that are absolutely senseless. The small investor is buying essentially what the insiders are unloading. Technically this is called distribution. For distribution to take place you have to have a willing seller and a willing buyer. The willing sellers are the management and owners who run the company. The gullible buyers are John Q., Herbie Homeowner, and Larry Lawnmower who think we’re going back to the good ole days of the late 90’s.
At this point owning gold or silver would be offensive to most people. If you want to offend someone at a cocktail party when the subject of investing comes up, just tell them you’re buying gold and silver. This happened to me recently at a social event. Knowing that I was in the investment business, several socialites asked me what I was buying hoping to get a few good stock tips out of me. They mentioned the NASDAQ's impressive rally this year. A few of them mentioned how well they were doing with their tech stocks. I could tell they expected me to confirm the wisdom of their purchases and fire off a few tech tips of my own. Instead, I told them I was heavily invested in silver and gold and that my juniors were up 200-300 percent this year--a fact that would have been impressive if the returns had come from techs. Instead what I got were strange looks as they quickly became uncomfortable with the conversation. The topic of investing was changed and my inquisitors moved elsewhere as if I was suffering from a severe case of flatulence.
What's So Strange?
Several friends of mine have expressed the same sense of strangeness whenever the topic of investing comes up and I talk about commodities--whether it is gold, energy, or the price of soybeans. They simply don’t understand it. When I explain the returns of 400-1,000 percent from precious metal equities these last three years, they look at me like there is something wrong. I tell them about the demand and supply fundamentals and how you want to buy when things are out of favor and the price is low. It still doesn’t make sense to them until I start talking about what they now have to pay for gasoline, their groceries each week, or their monthly utility bill. It then starts to make sense because they can relate and lament at what has happened to their cost of living each month. They have trouble when it comes to gold and silver. I try to explain to them that the inflation that they are now experiencing is all related to Fed inflation polices. The Fed is printing more money than has ever been printed before in all of history. The reason prices are rising for most things they need to buy each month is that the value of the dollar is depreciating.
I believe most people have a hard time understanding the concept of inflation. They look at the symptoms instead of the cause. Many people I talk to believe that rising prices are caused by greedy corporations raising prices or unions demanding more money. They don’t understand that inflation has always been and will continue to be caused by government polices to inflate the money supply and to print more money than they take in, cheapening the value of the currency.
If you explain the same concept in terms of company CEOs issuing more stock and diluting shareholder values most people understand. The only difference is that the government is doing the same thing that tech CEOs are doing. The only difference is that they are doing it on a much larger scale. As a U.S. citizen, you are a stockholder in the largest corporation in the world, the U.S. economy and its stock price is the U.S. dollar.
The one hard lesson to understand about new bull markets is that very few people recognize them when they begin. Bull and bear markets have three phases. The first phase of a new bull market is driven by insiders and the smart money that quietly move in and start accumulating when prices are rock bottom and when values are compelling. Smart money buying at this stage begins the bull market. Rising prices don’t get noticed or they are simply ignored, because most investors don’t believe in the sector.
When I first got started in this business, I had to beg clients to buy stocks. Nobody wanted to own them. Nobody wanted to own bonds either, even though you could get yields of 15% on Treasury bonds. Many investors had their money in money market funds or in banks. If they were investing, they were buying gold, oil, and real estate because that is what had gone up over the last 16 years. No one or very few people understood that Paul Volcker’s reign at the Fed had brought one era of investing to an end and had ushered in another era in paper assets which would take its place. The first phase of the bull market was simply ignored by investors. They were still chasing the past bull market in commodities much in the same way that investors are chasing tech stocks today in the hopes that the last bull market will return. In 1982 you could buy high quality stocks at 7 times earnings and get dividend yields of 7% on the Dow. Utility stocks had dividend yields of 14% and bond yields of 15-18%. The trouble is nobody wanted to own stocks and bonds just as nobody wants to own gold today outside of the gold bug community and the smart money.
It is not until the end of the second phase of a bull market which begins when institutions come into the market, that the general public wakes up to the fact that a new trend has emerged long after it has begun. When the public comes into the market, they move en masse and drive up prices to absurd levels. When the average Joe comes into the market, it is usually a sign that the last or third phase of the bull market has arrived. They drive prices to levels that no longer make sense. The insiders recognize this which is why they begin selling out all of their holdings as they are doing today. To quote from Extraordinary Popular Delusions and the Madness of Crowds, Charles Mackay writes:
“In reading the history of nations, we find that, like individuals, they have their whims and their peculiarities; their seasons of excitement and recklessness, when they care not what they do. We find that whole communities suddenly fix their minds upon one object, and go mad in its pursuit; that millions of people become simultaneously impressed with one delusion, and run after it, till their attention is caught by some new folly more captivating than the first.”
I’ll end today’s missive and leave the reader with the above three charts: one is of gold, the other of the HUI, and the last is the NASDAQ.
The reader should ponder these charts and arrive at your own conclusion. Which one of the charts reflects a new bull market and which one represents a bear market that is just in its formative stage? As for my own views, I believe we are just in the formative stage of what will become the greatest bull market for metals in all of history. It's to the moon, Alice, and maybe beyond.
Today’s Markets
Stock prices rose today after better-than-expected earnings from Computer Science and news that GM will ship 11,000 new vehicles to China. This is all noise, but it was noise that moved the markets. The Dow was able to recover from the losses of the last few days, hitting a 17-month high in the process. The NASDAQ got a lift from a report by the Gartner Group forecasting that chip sales will rise by 20% next year.
Investors were also impressed by a surprise earnings report from Applied Materials which earned its first profit in a year. The company’s profits fell 90% from last year. Net income dropped from $147.2 million to $15.5 million this year. Sales fell 16% from $1.45 billion to $1.22 billion. The company earned $.06 a share. Like most tech company earnings, the earnings figure excluded many items. The good news was that the company beat Wall Street estimates as sales and earnings plunged from the previous year. The stock price is up 95% this year on worsening earnings. To management's credit, they manage to beat estimates each quarter as sales and profits plunge lower. The stock rose $.54 to close at $25.44. It is up in after hours trading. Investors can purchase this stellar performer at 181 times trailing earnings.
Aside from the usual silliness that goes on in the market each day, today was a day when precious metals prices soared through the roof. While the Dow may have hit a 17-month high, the price of gold hit a 7-year high closing on the Nymex at $395. While the Dow is close to clearing 10,000 again, gold prices are edging closer to $400. At $400 an ounce, a whole new level of buyers comes into this gold market. The price of silver was also soaring. Silver prices rose $.26 to close at $5.335 an ounce, a gain of 5.3% for the day. If the price of gold and silver bullion was climbing higher, so were the price of metals mining shares which hit a six-year high on Wednesday. The Philadelphia Gold and Silver Index (XAU) rose 5.6% to close at 101.86. The Amex Gold Bugs Index (HUI) soared 15.91 to close at 224.82, a gain of 7.6%. Individual issues did much better. Shares of Coeur d’Alene were up 14.6 %, Durban Deep rose 11.6 %, Hecla Mining gained 14.8 %, and shares of Bema were up 12%. Alice, it’s to the moon!
Volume was light at 1.32 million shares on the Big Board and 1.8 billion on the Nasdaq. Breath was positive by 25-8 on the NYSE and 24-8 for the Nasdaq.
Jim Puplava
Chart courtesy: www.stockcharts.com <http://www.stockcharts.com> , www.ino.com <http://www.ino.com> and Bloomberg
"Canaccord Capital Corporation <canaccord.com>" made the following
annotations on 11/13/2003 02:48:04 PM
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As an investment, it isn’t on anyone’s radar screen, at least not on the screens of the general public. Yet in the last three years, the price of the yellow metal has risen 54% from its nadir of $255.55 on April 2, 2001 to today’s 7-year high of $394.45. The last time we saw gold prices this high was back in May of 1996. The movement in the price of the metal is nothing compared to what has happened to the price of gold shares. The Amex Gold Bugs Index (HUI) has soared by an incredible 440% since January of 2001. The index is up 82% over the last 52 weeks and has surpassed even the gains in the NASDAQ this year. The HUI is up 53% this year compared to 47% for the NASDAQ.
For the first time in many years, the price of both precious metals are moving up in tandem. In Nymex trading today, the price of silver rose sharply right on the heels of gold’s strength. December silver jumped $.25 to $5.31. With the price of gold edging closer to taking out the $400 level, it looks like silver will be challenging $5.50 level. The rise in silver is now confirming the rise in gold.
The rise in metals is also mirrored by the price of most commodities. Since hitting a bottom in March of this year, the CRB Index has advanced nearly 25 points for a gain of 11%. Individual commodities have done even better. The price of crude oil has moved from just slightly under $25 in January to today’s price of $31.28. Soybean prices have moved from a low of $507 in January to a price of $769 today. Base metals are also moving with copper prices challenging $0.95.
Wall Street analysts and anchors dismiss the price rise in commodities as just a passing fad. The movement in the price of gold is explained by the fall in the dollar and the rise in oil by the Iraq war. However, the Iraq war ended six months ago and the price of the dollar has been confined to a narrow trading range between 92-98 since mid June. If the war and the dollar are used to explain the rise in the price of gold and oil what explains the rise in price of copper, platinum, soybeans, wheat, cotton, and cattle this year?
What's The REAL Reason?
There is something going on here and it is more than just the price of the dollar. Demand for commodities has been rising each year and most commodities are running a supply deficit. The real driving force behind the rise in commodity prices is demand. The other driver is the value of the dollar.
Energy Demand
However, demand growth will ultimately become the biggest driver of commodity prices over the long run. Demand growth is coming from Asia and especially China. For example, demand from Chinese steel makers is lifting prices for iron ore in most major markets around the globe. The Chinese appetite for commodities has become insatiable. In the area of energy, China’s demand will more than double by the end of the decade. The daily consumption of oil globally will rise from 75 million barrels per day (mbd) to 89 mbd by 2010. World energy demand will consistently rise by 1.6% a year.
World Oil Demand
2000
2010
2020
2030
75 mbd
89 mbd
104 mbd
120 mbd
Source: International Energy Agency (IEA), World Energy Investment Outlook 2003, p. 181
Precious Metal Supply Deficits
On the gold and silver side, supply deficits have been going on now for well over a decade. This will be the 14th year that silver has run a supply deficit. Gold has been running a supply deficit equally as long. If it hadn’t been for central bank sales of gold at rock bottom prices, the price of gold would have been much higher years ago. However, the supply of gold in central bank vaults is now half empty. In the case of silver, aboveground stockpiles are being depleted in order to meet supply deficits and those stockpiles are becoming thinner and thinner each month. The only way to keep gold and silver prices down in through the paper markets in derivatives. That won’t work in the long run because the big boys have been buying for the last three years. That is what has driven up the price.
We are only in the first phase of this new bull market in metals. Institutional interest is nominal at this point and individual investors are content chasing tech stocks at exorbitant prices. As an investment, gold and silver investments are the furthest thing on investors' minds at the moment. Individual investors are still chasing the last bull market in equities, believing that a new bull market has arrived.
Climbing Aboard
Gold and silver investors have been having a feast over these last three years and the bull market has just begun. There is going to be a tidal wave of new money flowing into this sector as smart money managers around the globe move billions of new capital into the sector.
Exploration Budgets Increased
Already this year worldwide exploration budgets are up 26% after five years of consecutive declines. Much of this money is going into junior mining and exploration companies. That is where the big payoff is going to be in this new bull market. The shares of junior mining companies are up 100-200% this year as a group with some companies up as much as 2,300%. Junior mining and exploration companies have been doing the lion's shares of exploration over the last few years. However, the major mining companies are increasing their budgets, recognizing the dearth of new projects moving into the pipeline. Newmont Mining recently raised $1 billion in new equity to pay down debt and finance future acquisitions. The company is going to have to find and replace nearly 8 million ounces of production each year, which isn’t easy. One way to replace those reserves is through acquisitions.
Canada Leads
Mining experts believe this year’s increase in exploration budgets from $1.73 billion to $2.19 billion reflects the slowdown in industry consolidation. From 2000-2002 a number of mining companies disappeared through mergers and acquisitions. This absorbed a major portion of exploration budgets. Junior mining budgets are also rising by as much as 25% this year over last year reflecting higher bullion prices and improving investor sentiment. Most of the improvement in investor sentiment is coming from Canada as a result of the flow-through of tax rebates to investors for funds raised for domestic exploration. Canada’s share of exploration reflects almost 50% of this year’s exploration budget.
Global and Canadian exploration budgets are expected to increase next year at a high rate and remain high for at least the next two years as the price of gold, silver, copper and nickel remain buoyant. Higher prices are attracting new investment dollars as mining companies sense that a new bull market has begun for precious and base metals that has years to run. Even if exploration budgets prove to be fruitful, it will be 5-7 years before much of that new supply comes on board. In the meantime, demand for both categories of metals continues to grow at an accelerating rate driven by demand from the developing world, especially China and currency debasement which has yet to run its course. The U.S. dollar could eventually fall to as low as 80 on the charts and even lower if budget deficits and trade deficits don’t improve.
The Stealth Bull Market in Metals
The best thing about this new bull market in metals is that it has just begun and nobody has noticed. You won’t find gold on investment recommendation lists. It isn’t on the cover of investment magazines. It doesn’t make the front pages of the local newspaper and it is barely mentioned on BubbleVision. Most investors don’t understand the bigger monetary picture nor are they paying attention to what is going on in Asia and China, India, or the Middle East when it comes to demand and supply fundamentals which are the primary driver of this new bull market.
Like 1999 and early 2000, investors are chasing the price of Internet shares and tech stocks and paying astronomical prices to buy what is essentially a slow growth, cyclical commodity business. The little guy is buying what he doesn’t understand and paying exorbitant prices that are absolutely senseless. The small investor is buying essentially what the insiders are unloading. Technically this is called distribution. For distribution to take place you have to have a willing seller and a willing buyer. The willing sellers are the management and owners who run the company. The gullible buyers are John Q., Herbie Homeowner, and Larry Lawnmower who think we’re going back to the good ole days of the late 90’s.
At this point owning gold or silver would be offensive to most people. If you want to offend someone at a cocktail party when the subject of investing comes up, just tell them you’re buying gold and silver. This happened to me recently at a social event. Knowing that I was in the investment business, several socialites asked me what I was buying hoping to get a few good stock tips out of me. They mentioned the NASDAQ's impressive rally this year. A few of them mentioned how well they were doing with their tech stocks. I could tell they expected me to confirm the wisdom of their purchases and fire off a few tech tips of my own. Instead, I told them I was heavily invested in silver and gold and that my juniors were up 200-300 percent this year--a fact that would have been impressive if the returns had come from techs. Instead what I got were strange looks as they quickly became uncomfortable with the conversation. The topic of investing was changed and my inquisitors moved elsewhere as if I was suffering from a severe case of flatulence.
What's So Strange?
Several friends of mine have expressed the same sense of strangeness whenever the topic of investing comes up and I talk about commodities--whether it is gold, energy, or the price of soybeans. They simply don’t understand it. When I explain the returns of 400-1,000 percent from precious metal equities these last three years, they look at me like there is something wrong. I tell them about the demand and supply fundamentals and how you want to buy when things are out of favor and the price is low. It still doesn’t make sense to them until I start talking about what they now have to pay for gasoline, their groceries each week, or their monthly utility bill. It then starts to make sense because they can relate and lament at what has happened to their cost of living each month. They have trouble when it comes to gold and silver. I try to explain to them that the inflation that they are now experiencing is all related to Fed inflation polices. The Fed is printing more money than has ever been printed before in all of history. The reason prices are rising for most things they need to buy each month is that the value of the dollar is depreciating.
I believe most people have a hard time understanding the concept of inflation. They look at the symptoms instead of the cause. Many people I talk to believe that rising prices are caused by greedy corporations raising prices or unions demanding more money. They don’t understand that inflation has always been and will continue to be caused by government polices to inflate the money supply and to print more money than they take in, cheapening the value of the currency.
If you explain the same concept in terms of company CEOs issuing more stock and diluting shareholder values most people understand. The only difference is that the government is doing the same thing that tech CEOs are doing. The only difference is that they are doing it on a much larger scale. As a U.S. citizen, you are a stockholder in the largest corporation in the world, the U.S. economy and its stock price is the U.S. dollar.
The one hard lesson to understand about new bull markets is that very few people recognize them when they begin. Bull and bear markets have three phases. The first phase of a new bull market is driven by insiders and the smart money that quietly move in and start accumulating when prices are rock bottom and when values are compelling. Smart money buying at this stage begins the bull market. Rising prices don’t get noticed or they are simply ignored, because most investors don’t believe in the sector.
When I first got started in this business, I had to beg clients to buy stocks. Nobody wanted to own them. Nobody wanted to own bonds either, even though you could get yields of 15% on Treasury bonds. Many investors had their money in money market funds or in banks. If they were investing, they were buying gold, oil, and real estate because that is what had gone up over the last 16 years. No one or very few people understood that Paul Volcker’s reign at the Fed had brought one era of investing to an end and had ushered in another era in paper assets which would take its place. The first phase of the bull market was simply ignored by investors. They were still chasing the past bull market in commodities much in the same way that investors are chasing tech stocks today in the hopes that the last bull market will return. In 1982 you could buy high quality stocks at 7 times earnings and get dividend yields of 7% on the Dow. Utility stocks had dividend yields of 14% and bond yields of 15-18%. The trouble is nobody wanted to own stocks and bonds just as nobody wants to own gold today outside of the gold bug community and the smart money.
It is not until the end of the second phase of a bull market which begins when institutions come into the market, that the general public wakes up to the fact that a new trend has emerged long after it has begun. When the public comes into the market, they move en masse and drive up prices to absurd levels. When the average Joe comes into the market, it is usually a sign that the last or third phase of the bull market has arrived. They drive prices to levels that no longer make sense. The insiders recognize this which is why they begin selling out all of their holdings as they are doing today. To quote from Extraordinary Popular Delusions and the Madness of Crowds, Charles Mackay writes:
“In reading the history of nations, we find that, like individuals, they have their whims and their peculiarities; their seasons of excitement and recklessness, when they care not what they do. We find that whole communities suddenly fix their minds upon one object, and go mad in its pursuit; that millions of people become simultaneously impressed with one delusion, and run after it, till their attention is caught by some new folly more captivating than the first.”
I’ll end today’s missive and leave the reader with the above three charts: one is of gold, the other of the HUI, and the last is the NASDAQ.
The reader should ponder these charts and arrive at your own conclusion. Which one of the charts reflects a new bull market and which one represents a bear market that is just in its formative stage? As for my own views, I believe we are just in the formative stage of what will become the greatest bull market for metals in all of history. It's to the moon, Alice, and maybe beyond.
Today’s Markets
Stock prices rose today after better-than-expected earnings from Computer Science and news that GM will ship 11,000 new vehicles to China. This is all noise, but it was noise that moved the markets. The Dow was able to recover from the losses of the last few days, hitting a 17-month high in the process. The NASDAQ got a lift from a report by the Gartner Group forecasting that chip sales will rise by 20% next year.
Investors were also impressed by a surprise earnings report from Applied Materials which earned its first profit in a year. The company’s profits fell 90% from last year. Net income dropped from $147.2 million to $15.5 million this year. Sales fell 16% from $1.45 billion to $1.22 billion. The company earned $.06 a share. Like most tech company earnings, the earnings figure excluded many items. The good news was that the company beat Wall Street estimates as sales and earnings plunged from the previous year. The stock price is up 95% this year on worsening earnings. To management's credit, they manage to beat estimates each quarter as sales and profits plunge lower. The stock rose $.54 to close at $25.44. It is up in after hours trading. Investors can purchase this stellar performer at 181 times trailing earnings.
Aside from the usual silliness that goes on in the market each day, today was a day when precious metals prices soared through the roof. While the Dow may have hit a 17-month high, the price of gold hit a 7-year high closing on the Nymex at $395. While the Dow is close to clearing 10,000 again, gold prices are edging closer to $400. At $400 an ounce, a whole new level of buyers comes into this gold market. The price of silver was also soaring. Silver prices rose $.26 to close at $5.335 an ounce, a gain of 5.3% for the day. If the price of gold and silver bullion was climbing higher, so were the price of metals mining shares which hit a six-year high on Wednesday. The Philadelphia Gold and Silver Index (XAU) rose 5.6% to close at 101.86. The Amex Gold Bugs Index (HUI) soared 15.91 to close at 224.82, a gain of 7.6%. Individual issues did much better. Shares of Coeur d’Alene were up 14.6 %, Durban Deep rose 11.6 %, Hecla Mining gained 14.8 %, and shares of Bema were up 12%. Alice, it’s to the moon!
Volume was light at 1.32 million shares on the Big Board and 1.8 billion on the Nasdaq. Breath was positive by 25-8 on the NYSE and 24-8 for the Nasdaq.
Jim Puplava
Chart courtesy: www.stockcharts.com <http://www.stockcharts.com> , www.ino.com <http://www.ino.com> and Bloomberg
"Canaccord Capital Corporation <canaccord.com>" made the following
annotations on 11/13/2003 02:48:04 PM
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scuba
Fear blind us the opportunity, greed blind us the danger!
Fear blind us the opportunity, greed blind us the danger!
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