Delusions and Denials Prevent Recognition of the Truth

By Dr. Richard S. Appel         November 21, 2002 www.financialinsights.org

Excerpt from December, 2002 Issue
VolumeVIII, Number XII

The investing public remains in denial. This is in regards to the true state of the stock market as well as to a number of additional financial conditions and situations. They have already sustained trillions of dollars in cumulative equity losses. Yet, they are unswayed from continuing their personal spending patterns. Further, they remain convinced that common stock ownership is a prudent form of savings. This delusion has compelled investors to invest their capital into the various mutual funds and common stocks. Additionally, despite the loss of a significant part of their wealth they refuse to believe that they may be forced to alter their retirement plans. They continue to spend, spend, spend, while the outlook for their future incomes, employment and retirement requirements, deteriorate in an unchecked fashion.

THE GOLD MARKET

Gold once again attacked $325, only to be turned back when Saddam Hussein agreed to the access of UN inspectors. Gold plummeted over $6 on the news. Normally, after such a severe setback gold should languish for at least a week or longer, and possibly test lower territory before again advancing. However, on Friday, gold received renewed buying and climbed $2.70.

I believe that the entities that are acting to suppress the advance of the gold price are losing control. Further, due to the gallant efforts of Bill Murphy and Chris Powell, through their organization GATA (Gold Anti-Trust Action Committee, GATA.Org), I believe that some powerful hedge-funds and other entities are positioning themselves to benefit from the gold Bull Market. The appearance of substantial and sustained purchasing is reducing the downward magnitude of all gold price reversals. We may not have much longer to wait before gold rises above its temporary $330 ceiling and moves far higher in price.

The price of silver continues to mirror the price action of gold. As I have repeatedly stated, I believe that silver too is poised to move sharply higher in price. We may still have a number of months to wait, or only a few weeks. But rest assured, when silver breaks out to the upside, the incredible short position and dearth of above ground stockpiles that have developed, will force the short-sellers against the wall. It will require a substantially higher price to attract sufficient supply to allow the shorts to exit their positions.

THE RESOURCE MARKET

Both the major gold producers and the junior exploration companies have begun to firm in price. Each retrenchment in the gold price during the past month has been met with resistance by the gold stock complex, while each advance witnessed their share prices quickly firm.

We are into the tax-loss selling season that normally adds downward pressure to the Vancouver junior exploration companies. This year appears to be generating a subdued amount of selling for tax reasons. Further, it is beginning to feel as if the majority of sellers have already completed their sales. If we do not shortly experience renewed weakness in this group I believe that December will end with many of these companies at substantially higher levels than which it began. The major producers, on the other hand, are continuing to show superior strength compared with the yellow metal. A breakout to the upside in gold will carry these companies sharply higher.

Again, I want to emphasize that when purchasing major gold mining shares you should only acquire those of companies that have little or no hedges. This increases your ability to benefit when gold one day rockets higher in price, as most of the hedgers will not fully participate in the rise. Further, the hedged gold mining companies are at risk should gold soar. They may be called upon to cover their various hedges or to forward a substantial amount of money to pay for losses, that will accrue due to their various positions.

GOLDCORP INC.
(GG-NYSE)

Telephone Number: 416 865-0326

52 Week Share Price Range:$5.13 U.S. / $12.35 U.S.

Shares Outstanding: 182,000,000
Shares Fully Diluted: 207,000,000
Working Capital: $260,000,000 U.S.
Debt: Nil, Dividend: $0.12 U.S.
11-15-2002 Price: $11.06 U.S.

Goldcorp is the one of the few major gold mining companies that I have featured. As long-term readers know my emphasis has always been on offering junior exploration companies that offer exceptional risk:reward opportunities. I am featuring Goldcorp for those who would like an established senior gold producer, which possesses excellent management, to balance their more speculative mining share portfolio.

I have focused upon Goldcorp for a number of reasons. First, it is not in South Africa. I believe that the recent initiative by the South African government has cast a pall over those companies mining in that country. Next, Goldcorp is totally unhedged. In fact they have amassed a hoard of about 180,000 ounces of gold, that they either retained from production or actually purchased on the open market. They will enormously benefit from a sharp rise in gold rather than being threatened by it, as are so many hedged gold mining companies. Finally, I believe that they offer exploration potential on the property that contains their Red Lake Mine.

Goldcorp Inc. has a very aggressive management team. A few years ago they shocked the industry with a bold step, and took significant risk, in exploring for an extension of their Red Lake Mine. They were successful to that end and found both richer and wider gold veins to depths below 1 mile. They are now beginning to develop these deeper levels and expect to produce about 525,000 ounces of gold this year, from the Red Lake Mine. Their other mine is the Wharf Mine where they anticipate over 100,000 ounces of gold production for calendar 2002. Their total cost of production is below $100 per ounce.

Goldcorp has returned a compounded, annual share price growth rate of 36% since 1993. This is incredible given the declining gold price which prevailed during most of this period. They are the second largest unhedged gold mining company and expect to earn about $0.35 this year. They recently raised their annual dividend to $0.12.

I believe that Goldcorp represents an exceptional major gold mining company. Not only does it expect to produce over 600,000 ounces of gold in 2003, but they have budgeted $12 million for exploration. They will further explore for extensions of the gold mineralization below the Red Lake Mine. Also, they believe that they have excellent potential for the discovery of possibly two additional mines on their Red Lake Property. Goldcorp offers the opportunity to fully benefit from a rising gold price without the hedging and country risks that accompany the majority of major producers. Additionally, success from their substantial exploration projects will likely further enhance their future and share price.

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A monthly commentary on gold, finance and international resource companies.
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Contact: FINANCIAL INSIGHTS, P. O. Box 793-Z, Oakhurst, NJ 07755
rsappel@yahoo.com,

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Disclaimer: FINANCIAL INSIGHTS is written and published by Dr. Richard Appel and is made available to subscribers for informational purposes only. Dr. Appel pledges to disclose if he directly or indirectly has a position in any of the securities mentioned. He will make every effort to obtain information from sources believed to be reliable, but its accuracy and completeness cannot be guaranteed. Dr. Appel encourages your letters, but cannot respond personally. Be assured that all letters will be read and considered for response in future letters. Use of any information or recommendations is at the risk of the reader without responsibility on our part. © 2002 by Dr. Richard S. Appel. All rights are reserved. Parts of this newsletter may be reproduced in context, for inclusion in other publications if the publisher's name and address are also included for credit.