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October 17, 2011

BMR Morning Market Musings…

Gold has traded between $1,677 and $1,696 so far today…as of 8:25 am Pacific, the yellow metal is up $2 an ounce at $1,681…Silver is 11 cents lower at $32.05…Copper is off 2 pennies at $3.39…Crude Oil is down 58 cents at $86.22 while the U.S. Dollar Index has jumped nearly half a point to 77.04…

Silver Quest Resources (SQI, TSX-V) and Geo Minerals (GM, TSX-V) are each being acquired by New Gold Inc. (NGD, TSX) which reflects the growing trend of acquisitions and consolidation in this industry (much more of that is coming)…it was announced this morning that Silver Quest shareholders will receive 0.09 of a New Gold share for each Silver Quest share held and one common share in a new Yukon-focused precious metals exploration company, McIntyre Minerals Inc. for every three Silver Quest shares held…the proposed all-stock transaction values Silver Quest at $1.32 per share, implying an equity offer value of approximately $131 million on a fully diluted basis…SQI closed at 87 cents Friday and is currently up 28 cents at $1.15…with regard to Geo, NGD is acquiring GM (which holds strategic claims in the Blackwater District) for 16 cents per share in cash while Geo shareholders will also receive one common share of a new exploration company for every 15 Geo common shares held…

The companies that will be successful in the difficult months ahead on the Venture are those like Silver Quest and Geo that hold either significant 43-101 resources and/or highly strategic claims…companies with strong cash positions and 43-101 resources are the best bets…that’s why it’s so important for Gold Bullion Development (GBB, TSX-V) to release a 43-101 on the LONG Bars Zone…other examples of that nature – companies that will be reporting important resource estimates when they’re ready –  include Gold Canyon Resources (GCU, TSX-V) and of course Canaco Resources (CAN, TSX-V)…

The CDNX is off 12 points at 1546 while the broader markets are pulling back after strong gains since the October 4 lows…comments from  Wolfgang Schaeuble, the German finance minister, didn’t help the markets this morning…Schaeuble said that an ultimate solution to the euro zone debt crisis would not be presented at the upcoming European Union summit…

The U.S. and much of Europe may already be in recession while demand is dropping in emerging markets, according to the head of one of America’s biggest manufacturers…in an interview with the Financial Times, Tom Linebarger, who will take over in January as chief executive of Cummins, one of the world’s biggest engine-makers, said he expects the next six to nine months to be a highly uncertain time for the global economy…“The U.S. is much in the same spot,” Linebarger added…”We’ll find out in three or four months if we’re already in recession but it wouldn’t surprise me to find out that the U.S. is already in negative growth, once all the figures are adjusted, or we’re very close to that…“We’re seeing the effect in Europe on our business, though what worries me the most is the effect European problems will have on the rest of the world…the U.S. is already weak…if Europe gets a bad cold, the U.S. will get much sicker”…the Cummins chief said he’s also worried about emerging markets, whose growth has boosted the manufacturer’s bottom line and is expected to make up an increasingly important part of its revenues in coming years…three-fifths of the company’s revenues come from outside the United States…“Europe could drive another global recession pretty easily,” he said…”Some of the countries in Europe are already in a second recession or will be shortly… That could get a lot worse”…

Amid all the noise surrounding the “Occupy Wall Street” movement at the moment, there are two words we aren’t hearing from any of those individuals or from virtually any politicians these days:  “Personal Responsibility”…we live at a time when governments at local, provincial, state and federal levels simply don’t have the resources to solve every problem…we have to expect less, not more, from government, and more from ourselves as individuals….unfortunately, few politicians have the guts to actually come out and say that…as individuals, each of us must take greater responsibility for our overall health – financial and physical – and each of us has to manage our finances better…many of those involved in the Occupy Wall Street movement simply have no appreciation for the value of money or how to handle money which is why they don’t have it…rather than taking a good look in the mirror, they’re blaming other people for their problems…they’re rallying against “corporate greed” when greed is a problem throughout society, even in their own lives…their focus is on redistribution of wealth as opposed to income mobility…they’re engaged in class warfare and the politics of envy…they correctly understand there are problems in the “system” but their diagnosis is completely off the mark…Obama is feeding into that class warfare sentiment (“blame the banks”, “tax the rich”) which is a highly dangerous and irresponsible thing for a President to do…he views it as his only way to gain re-election, so a President who came into office with a promise to “unite” is now dividing the United States like never before…

The Occupy Wall Street Movement also reflects a serious lack of financial education prevalent throughout society…Canadian and American schools teach our children history, math, science, etc., but almost nothing about basic financial management and how to handle money (unfortunately, parents aren’t doing that either)…students know they need to earn money but aren’t taught how to keep it when they do earn it…former U.S. House Speaker Newt Gingrich touched on this issue of financial illiteracy in one of his recent comments regarding the Occupy Wall Street movement…“The sad thing is, this (the OWS movement) is a natural product of Obama’s class warfare,” Gingrich said…“We have had a strain of hostility to free enterprise and, frankly, a strain of hostility to classic America starting in our academic institutions…I regard the Wall Street protesters as a natural outcome of a bad education system teaching them really dumb ideas”…

While we have no great desire to defend the banks (nor to demonize them), Andreas Schmitz, head of the German banking federation and chief executive of HSBC Trinkaus, made a very true statement in an interview with the Financial Times yesterday…he said the protests against banks were “a diversion from the fundamental problem: that we can no longer finance our welfare states”…politicians, he warned, should not try to make the banks the “fall guys” for their mistakes…

On a final note this morning, the CRB chart below from John is in reply to Bruce’s comment yesterday re:  “The Week in Review Part 1″…

18 Comments

  1. No one will make the banks the fall guys. Banks around the world are being nationalised so the general public take on all the risk and receive none of the gain…..the protesters may be misguided but can you blame them when they see millionaires mess up so badly that they need government bail outs, yet still reap all the rewards of success.
    That isnt Capitalism, thats lazy obscene greed.

    Comment by Mark — October 17, 2011 @ 7:50 am

  2. Anybody hear anything about the mine&dine at gbb over the weekend?

    Comment by Hugh — October 17, 2011 @ 9:10 am

  3. The lowly folks are occupying Wall Street because, if i may cite one
    thorn in their side, the Banks were bailed out in part, using lowly
    folk’s cash & guess what, the banks turned around, using lowly folk’s
    cash to dish out a bonus to each & every one of their YES workers.
    The rich get richer & the poor get power… More power to the power
    of the lowly folks. I have nothing against GOOD rich people, but i
    just can’t stand Bad rich people. Sorry but i guess things’ happen
    that way. R !

    Comment by Bert — October 17, 2011 @ 9:24 am

  4. The corruption chain between the corporation and government need to be eradicated. My beef about the protest is their message that they are the 99%. That may be true. But, if anyone lives in North America, they should realize that they are top 20% or even 10% of the globe. There are billions of people without enough food or clean water or living on $2 per day. They should internalize that too before playing the victim card.

    Comment by Bruce — October 17, 2011 @ 9:31 am

  5. Great discussion here today! The west needs to learn that by the sweat of thy brow thou shall eat bread. But on the subject of bankers, we need to put those who knowingly committed fraud in jail and we should not be bailing out the bond holders of failed businesses. These people receive preferential rewards because they have taken on greater risk. the decision to make risk magically disappear for these people will end badly. The law of ‘conservation of risk’ is paramount if we are to have functioning capitalism. We don’t have functioning capitalism and we have never really ever had it. The system has always been subject to grave corruption.

    Comment by Hugh — October 17, 2011 @ 10:48 am

  6. This market is considered to be a bear market by BMR, maybe so,
    because a bear market is when stocks decline because of investors
    being very negative. Well, i will call it a bear market one day & a
    bull market the next. If someone farts in Europe, the Bears surely
    smell it, but if someone is able to say something positive, out
    come the bulls’.. Forgive me BMR, but i must state that you are
    falling into the negative camp,. Please try to be a little more
    positive, because you know it will change, our system will not
    collapse. We have to be positive & when one or more of us becomes
    positive, it breeds positivity. Who really wants to read that
    something negative may happen in November, December, January. The
    song goes, one day at a time dear Jesus. Good luck to all & don’t
    despair, because when we have a complete loss of hope, we may not be
    responsible for our decisions. R !

    Comment by Bert — October 17, 2011 @ 11:31 am

  7. Bert – nice to have u back… 🙂 BTW d v v was on your radar… still???? just asking:) since New Gold is buyng anything close the Blackwater eh!!
    thx in advance Bert:)

    Comment by Jeremy — October 17, 2011 @ 12:27 pm

  8. John: Thanks for the Fib chart. In terms of the Fib chart reading, if 61.8% was breached, does it mean it could potentially fall to 100%?

    Also, does 38.2% line be the next resistance? If so, should that be a stiff resistance since it going to 0% line not likely?

    Right now, the market movements are news driven but is that how you would read the chart? Thanks again.

    Comment by Bruce — October 17, 2011 @ 4:24 pm

  9. Welcome back Bert. Your honest and colourful commentary was missed! I too agree we need to keep positive, markets are being moved on negative news and as a result they are being hammered. I made investment decisions based on my DD and investment risk. BMR has provided a form and the string of information added additional value. I’m not out of the woods just yet; but I know a turn around is just around the corner.

    Comment by Paul — October 17, 2011 @ 6:23 pm

  10. The guys at bmr remind me of the two grumpy old guys on the muppets who sat in the balconey poo pooing everything and everybody, the only difference was they were funny. Whats wrong with a little protesting is it not our right in a free country? I find nothing wrong with people demonstrating against the corporate elite they have had it too good for too long, even when they screw up we the regular joe blows have to bail them out, then they slap us in the face. Viva la revolution!!!! Dan V

    Comment by Dan — October 17, 2011 @ 6:52 pm

  11. There is nothing wrong with demonstrating/protesting. In fact, many would agree on the issues of Wall Street corruption and their friend government bailing them out.

    What’s wrong is the “99%” message. Not all 1% is the Wall Street. Even some at my work was using the phrases like “need to RECYCLE wealth from that 1%” or “income EQALITY”. Those are very dangerous thoughts. I needed to remind them about other 80-90% of globe because if they truly believed in the income equality, they should give up most of what they have and recycle their wealth.

    If one person never visited/lived at/near current/former communist countries, they would never realize how dangerous and devastating those thoughts brought.

    Comment by Bruce — October 17, 2011 @ 8:03 pm

  12. Dan

    You are right on one point….my wife says I’m grumpy too!!!!

    Comment by John - BMR — October 18, 2011 @ 2:27 am

  13. Jeremy

    Reading over the comments this a.m. & noticed i missed yours yesterday, sorry about that.
    Yes, i am still active in DVV & feel it is as good if not better, than most low priced
    stocks out there, in particular because of it’s projects & low share structure. We may
    have to wait for better times to realize a move higher, but it will come. R !

    Comment by Bert — October 18, 2011 @ 3:34 am

  14. Another trading day & another possible poor start… We start our morning off by finding out
    that Jon is grumpy (we offer our sympathy dear wife). I look at my screen & notice Gold is really
    down, so what are my plans today, peep at my screen with one eye. R !

    Comment by Bert — October 18, 2011 @ 4:19 am

  15. Bert

    What a start to the day Bert…..You have the wrong Jon/John!!!!!!!!

    Comment by John - BMR — October 18, 2011 @ 4:37 am

  16. Sorry about that Jon, i never thought John would be the
    grumpy one, being connected to one of us. We must now
    blame it on the markets & that wobbly chart he uses. It
    puts me in mind of our weather man, who has all kinds of
    technology at his disposal, yet, i have a far better record,
    by checking the clouds & by the pains or lack of, in my body.
    R !

    Comment by Bert — October 18, 2011 @ 6:06 am

  17. I am an eternal optimistic, how can i live otherwise. Will
    we bounce back this afternoon, sure ! because most of the time,
    trades are made on rumors & rumors of rumors. We were bouncing
    back awhile back, until the German Finance Minister opened his
    mouth & he didn’t say much, but there were those, who wore hearing
    aids & haven’t changed their batteries for an extended period of time,
    shouted, Whattttttttt, what did he say & it went down from there.
    The different situations will be resolved, the stock market is pricing
    in the good & the bad & in the end, we will come alive again & today,
    yesterday will soon be forgotten. I am not a perfect trader, i am down
    overall, but i will bounce back, with a move here & a move there, i am
    determined & i consider this a learning lesson, which must be worth
    something. Have a good day. R !

    Comment by Bert — October 18, 2011 @ 6:46 am

  18. Here is something positive from Kitco website.
    I have included the closing paragraph.

    …TD found that in seven of the past 10 rallies, gold equities beat gold—averaging a beta of 1.4 times. Looking over the next year or so, we believe the smaller gold miners are especially poised to outperform this time. As TD says, “on a rebound, we expect the best performing equities to be among the ranks of the explorers and developers.”

    The article is a kitco.com/ind/Holmes/holmes_oct182011.html

    Comment by Alexandre — October 18, 2011 @ 6:57 am

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