AGORACOM Small-cap Investor Relations Blog

The Financial Collapse of 2008 means among other things, that Mike Myers will have to significantly adjust Dr. Evil’s dreams of “$1 Million” ransom significantly higher.

That’s because the ransom held by investment bankers over every one of our heads is between $5 and $6 TRILLION dollars. The $5 Trillion figure came from JF Tardif (ranked by Barron’s as the #18 Hedge Fund Manager on the planet) during an interview on BNN this morning. I live posted 4 of his comments in my Twitter micro-blog which can be seen seen in order here, here, here and (the Trillion dollar post) here.

The $6 Trillion figure came from this Financial Times article (hat tip to Paul Kedrosky). The FT article is a must read in it’s entirety, so I’m not going to provide any bullet point highlights.  Read it.

In the meantime, according to Tardif, start looking to shore up your portfolio with some good energy and agricultural plays.

Regards,
George

Oil is up on hopes that the bailout will stabilize the economy and bolster the kind of economic growth that will require more oil.

After hitting the SEC short wall on Friday, gold is resuming it’s rapid climb above $900 with a big $42 move as of 1:00 PM EST. Clearly, this is a flight to quality as investors fear US financial unknowns that can’t be masked by a ban on short selling.

However, more than just flight to quality, we also have the makings of a real supply demand issue.  If you missed my post of September 17th, here is an excerpt:

London-based researcher GFMS Ltd. states that Central Bank sales will drop 46 percent in 2008, while mine supply will decline for a third year.  Specifically, with respect to mine supply, global mine production will drop 2.3 percent this year to 2,422 tons, the lowest since 1996 That is going to put great pressure on an already string tight supply issue.

Regards,
George

Gold is up $64 to $844 as of 12:15 PM EST. I could end this post here and that one sentence could be the entire story.

However, like a good infomercial, “there is more!”.  Specifically, Bloomberg is running a story that gold may hit $950 by the end of the year “as central banks and miners hold back sales and investors buy the metal as a haven against falling stock prices.”

The good news for gold bugs is that a $950 price isn’t tethered to simply a shaky stock market. Otherwise, a market turnaround on its own could quell the gold rush.

Rather, London-based researcher GFMS Ltd. states that Central Bank sales will drop 46 percent in 2008, while mine supply will decline for a third year.  Specifically, with respect to mine supply, global mine production will drop 2.3 percent this year to 2,422 tons, the lowest since 1996 That is going to put great pressure on an already string tight supply issue.

Moreover, GFMS believes demand from investors worldwide will soar 38 percent to 778 metric tons, with purchases in east Asia more than doubling.

GRANDICH HITS THE NAIL ON THE HEAD AGAIN

If I didn’t know any better, I would think that Peter Grandich single-handedly sets the price of gold.  For about the zillionth time over the last 3 years, Grandich once again pegged an overextended gold price (oversold or overbought) when he made this statement just 5days ago in his newsletter:

“I have just recorded the single most oversold condition for Gold since the great
bull market began at the start of this decade”

After a brief hiatus, it looks like gold is back and possibly stronger than ever.

Regards,
George

As all of you know by now, I’ve been calling checkmate on the US Fed for 7 months now. In fact, I think it’s safe to call checkmate right now and it appears the folks over at Barclay‘s and RBS would agree.

As such, I’m now making another call – Big Ben’s days are numbered. To be fair, he didn’t have a chance. He inherited a pretty perilous credit/sub-prime situation that required forced him to keep rates low despite watching the inflation train coming right at him. I say “forced” for two reasons:

• White House pressure from an administration that didn’t want to see epidemic foreclosure and subsequent homeless rates;
• Wall Street pressure from a parade of bankers on CNBC that demanded lower and lower interest rates to save their hides.

Now, he has an inflation problem to add to the housing/credit/banking crisis that he could not solve despite super human efforts. Inevitably, one or both of these dominoes are going to tumble (no, they haven’t tumbled yet) and everyone is going to point the finger at Ben.

He won’t completely deserve it – but somebody has to take the blame. Ben will be replaced by the next US President.

Regards,
George

p.s. Gold closed at $941 today, with a high of $947.

After a pretty harrowing ride courtesy of sub-prime and Bear Stearns, it seems like all is quiet on the Western Front. Make no mistake about it, the fundamental problems have not gone away – but the market clearly believes the Fed can keep them “contained” (where have we heard that before). I still 100% contend the market was headed for a complete disaster had it not been for the Fed stepping in to save the day – and still remain weary – but we can all breathe a sigh for now.

According to this Marketwatch article, that sigh of relief is also supported by technical analysis that includes the following charts:

CONCLUSION

According to the article, “the S&P’s chances of clearing the 1,400-to-1,406 area look relatively good. If it happens, a decisive breakout would likely induce serious short covering — as well as natural buying — sending the U.S. markets on their next leg higher. Even more importantly, a breakout would confirm the March-through-April bottoming process, likely signaling a primary trendshift.”

For the many of you that are not well versed in TA (tech analysis) the article is a great read and helps explain the chart action.

For the gold bugs out there that think the gold ride may be over, I say quite the contrary. Why? Though a destructive US economy is bullish for actual gold prices, it most likely scared the hell out of investors that did not want to be invested in any individual stocks. If the pattern above actually plays out, gold itself may get weaker but gold stocks should actually get stronger with the reduced threat of a market meltdown.

At the end of the day, we may get a happy medium where gold is trading at a very healthy $800 – $900 range, which is more than economical for most exploration companies or small mining companies with quality projects.

Regards,
George