We’re pleased to report that the results are in from our first annual psychological analysis of the idiosyncrasies of the bear stock market.
Perhaps, it is best that we provide our observations without prognosis, because eight zillion books have warned us of the perils of making investment decisions while impaired by emotion.
(EMOTION: A psychic and physical reaction subjectively experienced as strong feeling and physiologically involving changes that prepare the body for immediate vigorous action resulting from negative vibrations from the left margin — Traders’ Edge Portfolio).
So, we present the harrowing results of our intensive analyses of a rollercoaster market.
Children, leave the room.
We have photographs of punch-drunk, shirtless investors in elevators (only, unlike in the TV commercial, these investors did not do their own investing but listened to their investment advisors).
From the street, we have observed shell-shocked stock brokers selling pencils on street corners and jumpy stock analysts with bags under their eyes recommending “hiding places” as strong buys. They refused to divulge the ticker symbol for Hiding Places.
On television, we have observed CNBC’s first-string quarterback, Maria Bartiromo, being mercilessly sacked in the trenches of the New York Stock Exchange by the rushing market makers at the Opening Bell.
We have observed irrational behavior, such as my pal Bre-Xer, a graduate of the Hail Mary School of Trading, who seems to have caught too much sun on that tropical hiatus, punting on first down. Yes, ol’ Bre-Xer is buying boring, old utility stocks.
Some contrarians might make a case that a mad, mad, mad, mad market emotionally spent is ripe for the picking.
Unfortunately, while psychology drives the market, investment guru Warren Buffett would be quick to reprimand us for failing to see that market psychology is driven by economic fundamentals.
Until the Americans learn to count and find their president, high energy prices drift back and Maria B. stops issuing earnings warnings with the urgency of a war correspondent, there seems to be a dearth of compelling factors pointing towards a sustained market reversal.
Utility stocks? Gee, maybe my pal Bre-Xer has something there.
ANALYST'S THREE STARS
Mining analyst Rob van Doorn of Vancouver-based Loewen, Ondaatje, McCutcheon has chosen three mining stocks.
Van Doorn favors Eldorado Gold (ELD-TSE) primarily on the company’s 100-per-cent owned Kisladag gold exploration project in western Turkey. Eldorado was recently trading at its year low of 43 cents, down from a high of $1.18, a familiar pattern for miners impacted by the low price of gold.
“There’s a lot of excitement over Kisladag,” says van Doorn of a project in which Eldorado estimates gold resources of 10 million ounces.
Great Basin Gold (GBG-CDNX) also gets the nod from van Doorn “because a takeover of this company is expected next year.”
Great Basin, a gold-exploration play with a recent price of $1.45 and year range of $1.37-$3.30, issued promising assay results from its Nevada mine earlier this year.
Van Doorn’s other pick is Pacific Northwest (PFN-CDNX), which is involved in exploration for palladium and platinum near Sudbury, Ont. He notes recent prices for platinum and palladium in excess of $600 and $800 per ounce, respectively. Pacific Northwest is aligned with Anglo American Platinum Corporation, the world’s largest platinum producer. It’s recent price was 59 cents (year range, 38 cents - $4.15).
TRADING TIP:
There are numerous factors in analysing a company, but never underestimate the importance of who is at the reins. Even Secretariat couldn’t win the Triple Crown without jockey Ron Turcotte. Imagine how much further Nortel would have sunk if investors didn’t take some solace in having John Roth at the helm.
SITE OF THE WEEK:
cantender.com
This local site, the product of “a bunch of oilfield bums,” offers a welcome respite from investing sites that take themselves too seriously. They admit they’re not market gurus.
It’s a handy site with general market commentary, an emphasis on technical analysis and links to numerous business sites such as Globe Investor, Canadian Business and Calgary’s Business Edge.
HOT STOCK: Westminster Resources
WML-TSE $2.70
Up .50 (+23%) on 258,000 shares (based on Dec. 1 closing price) Westminster’s stock rallied on word that a huge, unexpected natural-gas reservoir had been discovered in the Berkley #2 well in the East Lost Hills project in California. Calgary-based Westminster is one of several companies with interests in the project headed by Berkley Petroleum. The information on an unexpected second reservoir was released by Hilton Petroleum. Westminster also announced encouraging financial results showing the company is debt-free.
COLD STOCK: Cell-Loc
CLQ-TSE $6.50 Down $4.95 (-43%) on 1,833,000 shares (based on Dec. 1 closing price)
Squeamish investors were bailing once again from the TSE's wildest roller-coaster ride on a scary financial statement from the Calgary company showing a net loss of $6.9 million for the quarter ended Sept. 30. Even CEO Michel Fattouche's guarantee of personally funding the cash-starved Calgary company for up to six months if necessary failed to pacify jittery investors. Cell-Loc says it will slash its burn rate by reining in the full roll-out of its U.S. wireless locator network.
