2003 Review and Outlook For 2004
After sidestepping the stock
market devastation from 2000 through 2002, I did not participate
in the strong stock market rebound in 2003. However, by choosing
precious metals and mining shares over the DJIA and NASDAQ,
yours truly doesn’t regret his actions one bit. While
I believe neither the stock market nor the precious metals
and mining shares will match their respective 2003 performances,
I do believe it will be an up year for the metals. The same
can’t be said for the stock market.
– Simply put, I am investing with the assumption that
the majority of Americans have been living a life of excess
and that they have borrowed greatly from their futures (in
more ways than just monetarily). They are sitting on a volcano
and, when (not if) it erupts, it will be far worse and cause
more damage than anything that any terrorist organization
No matter where one looks in America these days,
the deterioration is evident. From family life and family
values to their financial well-being, psychiatrists say Americans
are generally worse off than their parents and grandparents.
This is despite an avalanche of Madison Avenue marketing that
has pontificated that “whoever dies with the most toys
wins.” This erroneous principle has caused many Americans
to chase a carrot that they can never satisfactory catch.
It has placed them on a dangerous course, filled with physical
and psychological landmines that will destroy, or financially
disable, them sooner rather than later.
“The stock market is the single best avenue
for financial success.” True or false?
FALSE!! For every 100 people who receive money as it
passes from one generation to another, few can say that it
was investing in the stock market that led to the family riches.
Ask any accountant or attorney that specializes in high net
worth clients and they will validate this claim.
The following is what I believe are the significant
factors that led to the family wealth:
· They simply inherited it,
· Family-owned business,
· Transacted real estate,
· Held a senior management position at company and
was granted a significant number of cheap stock options.
I do not believe that more than one or two will
say, “mom and dad threw ten or twenty grand in the market
and turned it into millions.”
It was twenty years ago that I first became
a stockbroker and I can personally attest to the fact that
nearly every financial advisor that I had ever met had not
made his wealth from his personal investments but, rather,
from the commissions and fees that he collected - much of
it due to stock market-related products and services.
cannot begin to count the many blessings that God has given
to me, especially after opening my eyes to what I once believe
was living the “American Dream,” when in fact,
it was a living nightmare. One of the gifts was meeting a
man named Frank Congilose. To experience his most sincere
honesty and integrity was something else, especially since
he is in the financial services arena. Thanks to him, I was
shown a financial process called LEAP or Personal Financial
- the only realistic and Godly way to assist one in matters
of finance. It proves, without a doubt, that the stock market
is not the Nirvana that many are led to believe. Through LEAP,
one can achieve a level of financial independence without
any out-of-pocket expenses and no additional risk (and, most
times, with less risk).
U.S. Stock Market
“Next year will
be a splendid year for employment.” Where have
you heard that before? In recent media reports? Perhaps. However,
in 1929, the U.S. Dept. of Labor said,
“1930 will be a splendid year for employment.”-
There is little doubt that after two devastating
years in which lives were unfortunately changed, the rebound
in 2003 was a welcome relief to stock market participants.
While far too much time is wasted on both predicting the future
(I tried it…it does not work) and on analyzing the past,
I do believe that the record low interest rates, significant
tax cuts, and no disaster on the Iraqi war and terrorism front,
have allowed for a significant rebound that may continue well
into 2004. However, I believe as we go from 2004 to 2005,
the market is likely to be heading lower and ultimately take
out the March 2003 lows sometime in 2005-if not sooner.
My Bearish Factors
– As just noted, there is enough momentum and euphoria
on Wall Street to extend the rise from the March 2003 lows
into 2004. However, I believe that the very people, who thought
that their lives were “over as they knew it” due
to their tremendous losses in their stock portfolios in 2001
and 2002, have now not only passed up on their prayers being
answered and had their portfolio rise back to a level that
they thought they would never see again, but have actually
become more leveraged into the market. They will become victims
of the “fool me once shame on you, fool me twice shame
on me” syndrome. But, then again, “bulls and bear
each have their day but the pigs always end up going to the
Simply put, the market is at one of its all-time
highest valuations. History has shown these levels to be places
to sell, not buy. Knowing the sales force on Wall Street loves
to say, “this time its different,” one needs to
ask what can support higher valuations over a long period
of time? The answer is lower interest rates and increased
productivity. We’ve seen a record on both fronts. And
while knowing that it is possible to see a little more upward
motion, why should one try to be the last one out before the
inevitable reversal occurs? U.S. corporate executives, a group
that recent history has clearly shown us knows much more about
the companies than their shareholders, has seen their insider
selling levels reach an intensity not seen since the market
peaked a few years back. But what do they know anyway?
There are a whole host of reasons why I suggest
2004 should be used as a selling opportunity for anyone whose
portfolio is more than 50% allocated to equities. Seniors
should consider no more than a 25% exposure to equities in
Other bearish factors include:
· It is my unfortunate belief that another
serious terrorist attack here in the U.S. is not a question
of if, but when. Remember how many felt after 9/11? People
wouldn’t fly, go to large public places, or even the
mall. While our government has done a credible job in trying
to protect us, I believe homeland security can never be 100%
infallible. Therefore, once we have a second terrorism attack,
many Americans will resign themselves that it is now a real
possibility and such reactions will seriously impact the economy
at a time when real troubles are brewing that are not related
· As noted in the beginning of this edition, Americans
have been living well beyond their means. As a country, we
continue to borrow from foreigners in order to fund our current
deficit. These folks did not mind doing so when the U.S. dollar
was going up or stable, but now that it is falling hard, they
are facing serious currency losses. These losses can, and
will, cause them to rethink their role as our Pusher. They
already own over half of our debt at a time when yields are
near record lows. Will they demand higher rates to offset
their increase risks? Or will they even decide to stop funding
our mess and repatriate their funds?
· The U.S. dollar, not too long ago considered by most
to be the “safe haven” currency of choice, has
witnessed a big swoon of late during a period of astounding
U.S. economic growth (stronger economies usually coincide
with their currencies rising, not falling). Many reasons have
been given for the dollar’s decline, but I believe that
the reason for its fall is that foreign investors have come
to the realization that we are not all part of the “Don’t
Worry, Be Happy” crowd that Wall Street still has many
Americans believing. Has the dollar plummeted against the
Euro because the EU has suddenly gotten its own act together
and is a much better place for capital? Heck no. It is just
the belief that we are a simply more worse off then they are.
· Many good Americans have worried about illegal drugs
ruining our younger generation. Well based upon how our young
folks have become hooked on “debt,” we should
have our military standing in front of credit card firms and
not our borders. Americans in general have been on a literal
feeding frenzy of borrowing in order to live and/or maintain
a lifestyle that they have been convinced is not only acceptable
but also it is “the American Way.”
· I sadly have to admit that I occasionally watch the
“soap opera of finances,” CNBC-TV. While I strongly
recommend that a paper bag be at your side most of your viewing
time, I remain astounded at how their so-called “economic
experts” could call the 2001 recession “mild”
and not recognize how badly it failed to correct what most
other recessions have done - lower debt and build up savings
for the next economic cycle. Consumer debt has grown by $1.5
trillion from 1997 to 2000, yet disposable income only has
risen $1.1 trillion. Throughout the 60s, the ratio of new
debt to new income was about 30%. Even in the “yuppie”
80s, it was only 50%. But in an era where the main purchasing
decision is whether we can make the monthly payment, debt
is now rising at triple-digit rates versus income. Make no
mistake about it, this cannot continue indefinitely. Eventually,
Americans either have to make more income, spend less, or
a combination of both. The last recession should have eased
our nation’s debt burden. Instead, it only added to
· One of the largest factors that allowed this shell
game to continue for many Americans has been the first cannot-miss
investment for the 21st century - housing. Dramatically lower
interest rates not only allowed a false impression that more
expensive homes weren’t really more expensive thanks
to mortgage payments for a $500,000 home being the same it
was for a $400,000 home a few years back, but it allowed Americans
to borrow from the last place that they had any real assets-
the equity in their home. People were raving about how strong
the housing boom was despite the recession. In fact, it really
came down to just two factors that kept the torrid housing
pace alive - the cost of mortgage and taxes (a.k.a. the payment
or “carrying costs”). Sorry America, but both
of those factors appear set to go against you. I think it
is foolhardy to think that interest rates will remain at record
low levels. Do not let realtors fool you; higher rates are
not good for real estate. And if you are one of those lucky
ones who locked in a 30-year rate near record lows, do not
think you won’t be affected. This housing boom has been
riding a crest on little, or no money down, deals. That is
fine when rates are not rising, but as rates increase, the
number of truly qualified buyers will decline. Once the game
switches from more buyers than sellers to more sellers than
buyers, the “house of cards” that the boom has
been built upon will fall. We are already seeing mortgage
borrowing volume coming down. I am afraid that it is the little-talked-about
second factor - property taxes that can surprise many of the
housing boom bulls. Throughout thousands of U.S. towns, real
estate taxes are rising at double-digit rates. This is occurring
due to a combination of falling federal and state subsidies
and rising municipal spending, which inevitably leads to property
taxes going up. The combination of both will burst the bubble
in residential real estate.
· Sadly, the attempt by Americans to keep up with the
mythical Jones, has help lead to a record number of new personal
bankruptcies. This has taken place despite a marked improvement
in the economy. What worries me the most is the number of
people whose bankruptcy filing was not their first one and
the number of people who filed bankruptcy because they exhausted
their savings due to medical costs. For those who think that
bankruptcy is the cure all to financial woes, be aware that
Congress is close to passing new legislation that will not
only make it harder for consumers to erase their debts, but
the debts themselves will not go away as they do now.
· While there has been a lot of it in the news lately,
most Americans have ignored it either out of ignorance or
because they have been told that it is nothing to worry about
- Protectionism. If we are to buy into the “one big
world economy” theory, then we must recognize that trade
is as important as our own national consumption. The news
regarding trade has not been good. In fact, Fed Chairman Allen
Greenspan and top IMF policy-maker Anne Kruger have openly
expressed fears that decades worth of trade liberalization
are being reversed and they have issued stern warnings against
increasing signs of protectionism.
stock market has enough momentum to carry it higher in the
first half of 2004. With an economy clearly expanding at the
moment, albeit on a structurally-poor foundation, it does
not make any sense to most individual and professional investors
to sell rather than buy. However, with valuations at or near
historically high levels and a severe price to pay for excesses,
most Americans have no idea that there is a price to be paid.
I believe that 2004 should be a year when equity exposure
is lower as prices move higher.
It appears, again, that some of the mouthpieces
that appear on financial shows are again talking out of both
sides of their mouths. For example, I heard one of them recommend
buying stocks because the economy is strong and that corporate
profits will grow. Fair enough, I thought. But in his next
breath, he said that he also liked the treasury market because
inflation is low and that corporations are having a tough
time raising prices, which should keep a lid on inflation.
EXCUSE ME! Am I to understand
that I buy stocks because corporate profits will rise; yet
also buy bonds because companies cannot raise prices? Wall
Street is the only place where having
your cake and eating it too is widely accepted.
Lots of reasons have been given for the rise
in gold (more later), but I believe that a major reason has
been the fact that real interest rates - the cost of money
after stripping out the percentage that compensates investors
for inflation, has gone decisively negative. This is highly
stimulative and I believe that the gold market has correctly
foreseen it leading to higher inflation down the road.
The stock market bulls have made much of the
strong productivity growth but discard what is known as the
“Neoclassical Growth Theory,” when they also predict
that interest rates will stay low. Neoclassical Growth Theory
states that increased productivity induces more business investment
to take advantage of new opportunities. That eventually forces
up real rates. If rates do not rise, the economy overheats.
Both Federal Reserve Bank of St. Louis President, William
Poole, and Fed Governor, Donald Kohn, have publicly stated
that interest rates eventually must rise after an upturn in
productivity. I guess these two gentlemen do not watch much
for some corporate bonds, I believe that most investors should
avoid long- term bonds.
Side note to bonds
– I wrote a lot about America’s pension woes in
2003. Adding to those concerns now in 2004, is the fact that
many state and local governments who are facing ballooning
pension promises to teachers, police officers and other employees,
have rushed into selling bonds to cover their pension shortfalls.
Such a strategy has backfired of late and ends up making the
taxpayer foot even more of a bill. Pension bond offerings
have increased 400% in the last couple of years. My concern
is not that the bondholder faces loss of principle, but that
we are just adding to the overloaded debt structure without
actually addressing the real problem. It is just another factor
in my long list that assures me that the upcoming graying
of America the most acute social, political and economic period
that America will have ever faced.
Investment Ideas for 2004 and Beyond
I do believe that there are four equity investment
themes that one can play no matter what direction the overall
market ends up heading. They are:
– 9/11 forever changed how America and much of the world
perceived safety. I believe that an inevitable second major
attack on U.S. soil will cause those who are back to normal
pre-9/11 or still on the fence jump firmly into the “we
need to spend and do whatever it takes to be safe” mode.
It won’t be long before an eye-scanning or fingerprint
scanning will determine who has access to a wide range of
facilities and areas when safety is important.
· Energy – While
oil and gas remain worthy investments, the power outages of
2003 proved that not only did our electric infrastructure
need major changes but also there was an acute need for alternative
energy sources and ways to improve current energy sources.
· The Real 21st Century Crisis
- the Aging of America - I urge you to re-read my July
17, 2003 edition -The Aging Crisis: It Will Not Be Just A
U.S. Problem. The social, political and economic changes that
are set to take place will catch most Americans seriously
off-guard. Those Americans who are unaware and who are unprepared
to face these changes will face adversity but also will generate
outstanding opportunities for others. GDP expenditures related
to medical issues are expected to double in next 7 years.
Assisted living is but one of the new ways the graying of
America offers investment opportunities,
· Internet – Back
at the height of the Internet bubble, I wrote an article for
a major New Jersey publication, www.njbiz.com.
It was the only bearish article on the Internet amongst the
many Pollyannaish forecasters. Well, we all know what happened
to that bubble and from that carnage, survivors arose and
some have begun to prosper in earnest. How many of us do not
realize how the Internet has become a part of our everyday
lives? Our young children only know computer life and most
of us “elders” have either willingly entered the
computer age or we were dragged in kicking and screaming.
I have often spoken about how most American’s
stock portfolios are poorly allocated. Please re-read my July
17, 2003 edition under “Foreign Markets-The Better of
In our premier edition of North of the Border
I spoke about how important Canada and the U.S. are to one
another and I touched on NAFTA. From an economic standpoint,
I think that many have divided the global economy into 3 big
arena players - with the rest of the world outside hoping
to get a ticket in. The three economic arenas are:
· The America’s, with the United States the major
engine that could.
· The EU,
· Asia, with China the new big kid on the block and
Japan a distant second.
I invite you to read our January 1, 2004 edition
of North of the Border for our America’s prospective.
Here, I would like to look at the EU and China.
It would be fair to say that the unification
of many of the major countries of Europe has been a mixed
blessing. It certainly did not come together as fast or as
effectively as many first thought it could, but it has brought
some benefits to many of its members. Some may think that
with the EU currency reaching new highs almost daily of late
versus the U.S. dollar, that things were honky-dory within
the EU. Unfortunately, I think that the rise is more a distaste
for the dollar than a desire for the EU. One only has to look
at how the EU has fared against other major currencies other
than the U.S. dollar to know that the world hasn’t decided
to beat a path only to the EU door.
One reason the path wasn’t beaten is the
recent failed Constitution Summit. EU members, Spain and Poland,
have blocked plans to give bigger EU country members more
voting power that would take into account population size
of each member country. Germany and France have led the move
for this enactment. This failed attempt came just five months
before 10 new, mainly formerly-communist countries are to
join the current 15-nation bloc. The December collapse was
part of a traumatic year for EU members who saw themselves
split over the Iraq war. The EU budget rules were bent despite
protest of some members, Britain delayed its entry indefinitely
and Sweden voted against joining the EU. Additionally, there
appears to be a two-tier membership with France and Germany
in the “Big Boys” camp and the rest on the outside
Ireland’s Prime Minister, Bertie Ahern,
has taken over the EU’s rotating presidency this month.
Do not expect much from him or the EU until shortly before
the next regular EU summit in March. The battle over voting
power within its complex weighted voting system is not going
away. In fact, many fear gridlock once the bloc expands into
Eastern Europe, which has a population of about 450 million
people. Ahern will sit front and center as some members are
expected to propose the following:
· A reform whereby most decisions would pass if backed
by a majority of EU states representing 60% of its population,
· A desire to have a long-term president of the European
Council of EU leaders,
· A EU foreign minister to represent the bloc on the
· Simplification of legislative procedures currently
This past November, Mr. Jean-Claude Trichet
took over the reigns at European Central Bank (ECB). The former
Banque de France Governor now oversees monetary policy for
the world’s second largest economy, home to 305 million
people and soon to more than double. Investors worldwide would
pay heed to what he and the ECB do and do not do. The ECB
has done a good job on:
· The introduction and implementation
of the new currency,
· Establishing credibility in financial markets,
· Keeping enforced mandate on inflation ceiling of
The ECB still needs to work on:
· Stimulating economic growth, which
has been stuck below 1% throughout 2003,
· Clarifying who is responsible for what in any banking
crisis within the EU,
· Work more closely with EU finance ministers,
· Appearing to do a better public relations job.
Bottomline – A poll in
September 2003, showed that the majority of its member countries
have not embraced the EU. Only 48% of EU citizens viewed membership
as a “good thing,” down from 54% earlier in the
year. Even France, a country that was a leading advocate for
the formation of the EU, saw less than half their population
China – It isn’t going
to settle to be the “Avis” amongst global economic
A recent Goldman-Sachs report predicted that
by 2050, China, combined with India, Russia and Brazil, could
be a bigger economic power than the G-6. While many Chinese-related
equities experienced nice gains in 2003, most investors have
still not recognized what a formable economic power China
has become. It is certainly worth noting that back in the
1980’s, Japan was touted as the next super economic
power only to witness it fall into a deflationary spiral that
still has not fully ended. But China is an entirely different
story. Its exports have grown eightfold between 1990 and 2003.
In America, there is a growing perception that
just about everything we buy is made, or at least assembled,
in China. This has caused a dramatic trade deficit between
our two countries. One of the reasons that China has been
able to grow so rapidly as an economic power is its ability
to pay extremely low wages to its people. Chinese wages are
only about 93% lower than the wages paid in South Korea and
Taiwan and 97% lower than of those paid in the U.S. One would
surmise that such low wages would greatly limit much of a
consumption market in China but the Chinese economy is already
huge. Its market for TVs, VCRs, handset telephones and motorcycles
are larger than our own. And despite producing more steel
than the U.S. and Japan together, it still imports steel.
There is also little doubt that the strong commodities market
in 2003 was greatly enhanced by China’s growing need
for energy, food metals and fabrics.
As noted earlier, there is a growing call for
protectionism here in the U.S. Many believe China is a perfect
example for it. I believe that protectionism may sound good
politically, but it performs poorly in the real world. The
Bush administration’s decision to slap unilateral quotas
on imports of Chinese textile products, combined with threats
to do even more, is not good for either side. Unfortunately,
already over half of all anti-dumping cases brought by U.S.
companies are against China.
Many countries have a significant trade deficit
with China. But at least China hasn’t seemingly tried
to keep it just a one-way street. It has seriously opened
its doors to foreign direct investment. In 2002 alone, it
saw the second greatest amount of such investment flow in
the world. And let it be known that foreign companies and
joint ventures between foreign companies and China account
for about 50% of China’s exports and about 60% of its
And, for those Americans who took advantage
of lower interest rates, send a thank you card to China. China
has purchased more than $100 billion in U.S. government securities,
which has help keep rates low. China’s, Japan’s
and other central banks of Asia continue to channel a substantial
amount of their domestic savings into U.S. securities, which
in turn, have helped fund our current account deficit.
it or not, China better be way up on your list of important
economic factors. It is still not an easy investment environment,
but it is only a question of when, not if, Chinese-related
investment vehicles will be parked in most American investment
Precious Metals – A 21st Century
After saying goodbye to the metals and mining
share industry at the beginning of the new millennium (and
not missing much), I have returned to that arena this past
spring. Proving that timing is everything, tremendous good
fortune was heaped upon me and those who chose to make this
investment arena a significant part of their overall portfolio.
While the “Don’t Worry, Be Happy” crowd
on Wall Street cheered the equity markets rebounds, the “Better
Worry, Be Prepared” gold bug crowd saw their God, gold,
resurrect itself in 2003. Some of them were heard praying,
“Hail Gold, full of pace, the hoard is with you.”
In an era where most investors’ only question
to their advisor is, “What have you done for me lately,”
the $64,000 question is whether gold and the other metals
continue to rise or whether it will revert to its reputation
for most of the last 20 years - fizzle out into a deteriorating
bear market before most can make a buck or two with it.
While, thankfully, I missed little during my
three-year absence from the metals market, it did allow me
a chance to reflect on the arena where metals-related investments
are marketed. Upon returning to that arena, I discovered that
much was still the same. A dozen or so “experts”
were the featured “authorities,” one or two of
them gone and replaced by new faces. Many of the junior resource
companies had come and gone or changed their names and restructured.
And while some new corporate management faces were apparent,
it was still pretty much the same gang - only the companies
that they run or work for had changed. It may seem fairly
large within this arena, but the metals and mining investment
arena is quite small when compared to most other investment
vehicles. If one misses three years in the technology sector,
one would need a program to know the current players.
With gold making some real noise for the first
time in years, the vast majority of “newsmakers,”
who were called upon to explain the reasons, are still pretty
much the same gang that it has been for a long time. So why
does this matter? I believe that many of the old gang has
battle scars. They have lived through very tough times and
most have old predictions that they hope that no one recalls.
While there will always be the ones who keep predicting that
gold will hit the moon, and like a broken clock eventually
be right at least twice a day, many of them are hard-working
professionals who have rightfully taken the “better
to be a live chicken versus dead duck” approach to gold
forecasting. After having the rug pulled from underneath them
so many times, they have this nagging thought in the back
of their head that gold will once again hit a brick wall and
go backwards after that. It’s very understandable.
I happen to believe that this metals markets
is going a lot higher and lasting a lot longer than most imagine
as you read this. Knowing that you can’t expect a typical
Wall Street suit to believe this as rip-roaring, simultaneous
gold and equity markets just do not happen over the long term.
It is hard to find someone with this belief other than the
gold hawkers who have been predicting gold will equal the
DJIA and other sky high numbers their entire careers. Now
it’s fair to say that I, too, am biased, since part
of my livelihood is working with resource companies that benefit
from higher prices. Let it be known that I choose to come
back to this arena not out of necessity, but on the belief
that a powerful bull market in metals was upon us and I wanted
a front row seat.
Gold – It
has followed the ups and down of the U.S dollar during the
second half of 2003 and that shouldn’t change much for
the foreseeable future. I suspect that we will eventually
see some serious currency intervention on behalf of the U.S.
dollar. And while gold can use that as an excuse to correct
some, the forces behind this upward move is far stronger than
just a play off of currencies. One of those forces is the
recognition that real U.S. interest rates are negative, which
is highly stimulative and, sooner or later, they are going
to lead to higher inflation rates. Coming off such a low rate,
the increase can be perceived as large and the “Don’t
Worry, Be Happy” money will flow into the gold market.
When I reentered the gold market at around $325, my original
target was $500. In my heart of hearts, it appears only a
question of when, not if, this target is taken out.
The orphan among metals, it has ridden behind the noise coming
from gold but nevertheless has done okay. I expect it will
remain behind gold until we get to the latter stages of the
I called it the “stealth bull market” and it had
one of the quietest rides to above $800. Believe it or not,
it can reach $1,000, but much of the upside has been achieved.
This is not to say it will fall hard. Lots of money remains
on the table for those companies that explore and produce
I believe that it has bottomed and it will have a nice upward
move in 2004 and beyond.
Base metals –
You’ve come a long way, baby, from the days of the 1997-98
Asian crisis and the Sumitomo Corporation scandal. While commodities,
in general, had a very good year, base metals did great. The
Gold Fields Mineral Services (GFMS) base metals index rose
over 40%. While the U.S. economic rebound helped, it was Asia’s,
and particularly China’s, high growth rates and ambitious
infrastructure spending that has been the locomotive pulling
this market up. No real reasons to think it can’t continue
and base metals have done well but are expected to continue
their respective rises for the foreseeable future. While some
goldbugs remain disappointed that the mainstream financial
media has paid little attention to the metals run, I for one,
am grateful. When they do and your cabbie or dry cleaner starts
telling you that they’re making a killing in the metals
markets, the time to sell will be acute.
2003 was a very good year. No, make that a very,
very, very good year. After what seemed like an eternity of
agony, the resource players who survived were well-rewarded
for their staying power. Triple-digit returns were not uncommon
in 2003. While I doubt that we will see similar results in
2004, the big mistake for most will be to be under-weighted
now in this sector. The biggest gains are likely to come from
companies that are able to expand an initial discovery into
a far bigger resource. Base metal plays should have equal
representation with precious metals ones in your portfolio.
The following companies have compensated
us for our services. While I must be considered biased in
my opinions, be advised that no amount of compensation can
make me say or do anything that I would not do or say if I
were not compensated. Please read their individual initial
coverage reports on our website for particulars. All share
prices are Canadian
ARQ-TSX $2.79 - Our initial coverage called ARQ “a textbook
play.” Since then, the company has completed several
more chapters and is at an all-time high. Resource players
should make the development of ARQ a blueprint for all future
junior resource selections. I am hard-pressed to find any
valid reason not to anticipate ARQ completing the final chapter
and either be bought out or becoming a full-fledged producer.
Cassidy Gold CDY
TSX $1.24- The Company just announced follow-up drill results
to its initial discovery holes earlier in 2003. I have called
CDY the next Nevsun and I do believe these latest results
(with more to follow) do nothing to change that opinion. I
Believe CDY will be among the story stocks for 2004 www.cassidygold.com
CanAlaska Ventures Ltd
CVV-TSX $.41- Perhaps New Zealand should be added to the company
name as the company has recently announced the first of several
anticipated ventures into New Zealand. The CVV’s of
the world are awaiting the drop down effect one can usually
count on in the resource game. This is when the second and
third tier players, many who haven’t been active in
the early stage of the bull run, have put together projects
that bring interest from those who made money on the majors
and the first tier resource plays. It is when the moose pasture
plays run that it will be time to get out. www.canalaska.com
Freegold Ventures Ltd
ITF TSE $.62- I have participated in a private placement and
bought large amounts of shares in the open market. The hope
is that several of the company’s long time assets will
now move to the forefront with the sharply higher metal prices.
If so, the expectation is a triple-digit return. www.freegoldventures.com
GIX-TSX $1.53- Every once in a while, an early stage resource
play comes along that legitimately allows your mouth to start
watering in anticipation of a major drill program. I have
an unusually high confidence level with GIX, due to the fact
that old brokerage clients and I did very well by backing
certain GIX officers when they were at another company. Normally,
such confidence is just asking for egg on one’s face,
but I would be less than 100% honest if I did not note my
extremely high level of hope. Some very smart people are watching
their upcoming drill programs with great anticipation. www.geologix.ca
GRS TSE $.63 and RJK Explorations RJX.A TSX $.16 - At the
risk of offending one of the other companies here, I must
tell you that these two companies are my “sentimental
favorites.” Run respectively by brothers Bob and Glenn
Kasner, these two gentlemen are among the finest, honest,
hard-working people I have met in the resource business. If
any two men are deserving of success, these two men are. GRS
is still trying to close on the funds needed to bring its
Goldfields project into production. With so few shares outstanding
versus the stage it’s at in development, GRS is deserving
of patience. RJK continues to get good sniffs on the exploration
front and has been able to raise enough money to put more
holes in the ground again and again. Here’s hoping 2004
is both their years. www.kasnergroupco.com
International Lima Resources
LMG-TSX $.33 - While I’m only on board in the last month
or so, I’ve been most interested in the developments
at the company. Even more impressive, was the reaction I got
from some very respected players in the resource game to my
association with LMG. They spoke very highly both of the projects
and the people at LMG. 2004 appears to be the break out year
for LMG. www.newfoundlandgold.com/lima
Minterra Resource Group
MTR TSX $.23 - MTR is a classic example of my resource maxim
that management is the absolute key to any resource company.
John Greenslade is one of those tireless guys who wears his
company on his sleeve and puts his own money where his mouth
is. John Greenslade has had great success with a private company
and some how manages to stay in the batters box long enough
to finally get a sweet one to swing at. Look for John and
MTR to be up and swinging this spring on their B.C. project.
Northern Dynasty Mines
NDM TSX $6.39 - Without question, NDM is the blue chipper
of all my companies. While Friedland and Ivanhoe get most
of the headlines, NDM has gone about its business in bringing
to the forefront one of the best gold-copper projects in the
world today. And, unlike Ivanhoe, the stock remains very attractive
relative to its assets. I must tell you that I often wonder
why NDM’s booth at gold shows is not totally swamped.
With a floor of exhibitors hoping they have (or will have)
a million or two million ounce deposit, NDM can proudly showcase
a resource only the other exhibitors can dream of. Why NDM
is not in just about all types of resource portfolios is beyond
me. Yes, it had a spectacular gain in 2003, but triple-digit
return potential still appears on the horizon barring a collapse
in the gold and copper price. www.northerndynasty.com
Pacific Northwest Capital
Corp PFN TSE $1-The blue chip play of the Harry Barr
stable, PFN just goes about its business of demonstrating
it can end up the third platinum-palladium mine in North America.
The recent financial support from Endeavour Mining Capital,
along with a growing institutional following, can make 2004
PFN’s best so far. www.pfncapital.com
Phoenix Matachewan Mines
PMM TSX -V $.19 - Our 2003 no-brainer double is well on its
way to achieving that and more. The Company remains optimistic
that it will be in production in 2004. In the first quarter,
its acquisition and exploration plays can move to the forefront
of this developing story. www.phoenixmatachewan.com
PXC TSX-V $.21 - Pardon the pun, but I have speculated that
PXC is a “diamond in the rough” among Canadian
diamond plays. I suggest you read our initial report of December
10, 2003 because I would not be surprised to see this play
begin to show up on the radar of diamond players in 2004.
The following companies are stocks that I have
purchased in 2003 with hopes of $$$ for 2004. Remembering
that I have a wall full of $$$$ stock certificates from previous
years, please approach them with due caution.
ILTA.C $.74 - A most interesting early stage technology play
that was brought to my attention by one of the corporate finance
people that I trust in Canada, Mr. Steve Khan. Very little
to say at this point other than to put it on your watch list
STM-TSX $.64 - Here too, Steve Khan played a role in my involvement.
Some of the major players in the resource game have participated
in recent private placements, along with yours truly. The
uranium market has had a major turnaround and this company
is among a small group of public vehicles to play it. They
have also put some interesting metals plays into the mix and
I suspect it can become one of the highlighted plays among
the newsletter crowd, especially since some of the writers
are participants in the placements. That’s how it goes
in the resource arena. www.strathuranium.com
What certain people and groups do with
· You have two cows
· Your neighbor has none
· You feel guilty for being successful.
· You vote people into office that put a tax on your
cows, forcing you to sell one to raise money to pay the tax.
· The people you voted for then take the tax money,
buy a cow and give it to your neighbor
· You feel righteous.
· Barbara Streisand sings for you.
· You have two cows
· The government takes one and gives it to your neighbor.
· You form a cooperative to tell him how to manage
· You have two cows.
· Your neighbor has none
· You have two cows.
· The government seizes both and provides you with
· You wait in line for hours to get it.
· It is expensive and sour.
Capitalism, American style
· You have two cows.
· You sell one, buy a bull, and build a herd of cows.
Democracy, American Style
· You have two cows
· The government taxes you to the point you have to
sell both to support a man in a foreign country who has only
one cow, which was a gift from your government.
Bureaucracy, American style
· You have two cows.
· The government takes them both, shoots one, milks
the other, pays you for the milk, and then pours the milk
down the drain.
· You have two cows.
· You sell one, lease it back to yourself and do an
IPO on the second one.
· You force the two cows to produce the milk of four
· You are surprised when one cow drops dead.
· You spin an announcement to the analysts stating
you have downsized and are reducing expenses.
· Your stock goes up.
· You have two cows.
· You go on strike because you want three cows.
· You go to lunch.
· Life is good.
· You have two cows.
· You redesign them so they are one-tenth the size
of an ordinary cow and produce twenty times the milk.
· They learn to travel on unbelievably crowded trains.
· Most are at the top of their classes at cow school.
· You have two cows.
· You engineer them so they are all blond, drink lots
of beer, give excellent quality milk, and run a hundred miles
· Unfortunately, they also demand 13 weeks of paid
vacation per year.
· You have two cows but you don’t know where
· While ambling around, you see a beautiful woman.
· You break for lunch.
· Life is good.
· You have two cows.
· You have some vodka.
· You count them and learn you have five cows.
· You have some more vodka.
· You count them and learn you have 42 cows.
· The mafia shows up and takes over however many cows
you really have.
· You have all the cows in Afghanistan, which are two.
· You can’t milk them because you can’t
touch the cow’s private parts.
· Then you kill them and claim a US bomb blew them
up while they were in the hospital.
· You have two cows.
· Employees are regularly maimed and killed attempting
to milk them.
· You have a black cow and a brown cow.
· Everyone votes for the best looking one.
· Some of the people who like the brown one best, vote
for the black one.
· Some people vote for both.
· Some people vote for neither.
· Some people can’t figure out how to vote at
· Finally, a bunch of guys from out-of-state tell you
which is the best-looking one.
New York Corporation
· You have fifteen million cows.
· You have to choose which one will be the leader of
the herd, so you pick some fat cow from Arkansas
Have A Most Blessed 2004!
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P.O. Box 243
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