Buy Goldcorp Now

27 February 2011

Here is perhaps the most important chart for Goldcorp:

Goldcorp has been declining against gold since May 2006 (see chart).

Goldcorp has just released a blow-out report. It is now performing better than ever, with increased production, increased reserves, new mines opening, an increased dividend, ballooning profits, etc.

I submit that the reversal of this almost 5-year downtrend (the ratio of Goldcorp's price to the price of gold) may have started in January 2011. If this is the case, Goldcorp's upside (from a ratio low of .0293 in January 2011) could be a recapture of the .05 level - even higher.

Let's say that gold is at $2000 by the time Goldcorp retakes the .05 ratio. This would put Goldcorp's share price at $100 (from today's $46.00).

Now I'm speculating. If we see $2000 gold in 2012, that means that Goldcorp could gain 100-150% by some time next year.

Short-term moves are hard to predict. but my intermediate target for Goldcorp is now $100.

Buy Goldcorp.

1 March 2011: FYI, the Gold Stock Analyst has just raised his long-term target for Goldcorp, based on the recent news. I recommend that you subscribe. Click here!
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The Kenora March Palette: 2009

15 March 2009

I began to publish the Kenora Palette Series in March 2008.

March is a magical time of year in Northwest Ontario, though you have to wander the back country trails to appreciate the beauty of our region in its fullest flourish. The magic is not usually visible from the highways, as it is too subtle and delicate to be captured by this method.

We are travelling out of town for several weeks at the end of this week, so I selected today as the last opportunity to capture the waning winter magic of our surrounding trail system.

Most of today's photos were taken on a network of local trails which Susan and her friend Linda Moncrief helped to clear, beginning this time of year in 2008.

What creates the magic of the Kenora March Palette? Certainly the gently receding blanket of winter snow is a key ingredient, but there is more. Another required component is the evening sun - now venturing further north - which highlights the subtle and always muted tones of bare trees and stark granite against the crystal white layerings of now soft and gradually disappearing snow.

The temperatures this time of year can be quite variable. One day will see -28 degrees Celsius, and the next will register -4 degrees Celsius. The, out of nowhere, as has occurred the past two days, the temperatures will jump well above zero, and the crystalline fabric of winter will recede so rapidly as almost to disintegrate.

Come with me now for an evening walk along the winter trails northwest of Kenora.

The following photo illustrates well the principle of the subtle glint of light illuminating the diffusely pigmented surface of the birch in the darkening forest.

The following closeup of the same tree makes clearer still the ephemeral nature of the evening light as it yields to the darkness that until recently has ruled and dominated our landscape, challenged only by the fleeting dash of the winter sun across the southern horizon.

Occasionally our pathway is framed by fallen trees or other markers offered by nature. This particular fallen red pine, almost exactly horizontal, is my favourite of them all, though the opening created is somewhat lower than head height.

A glimpse to the side almost anywhere along the trail will reveal the irregularities of the natural world softened by thick blankets of downy northern snow. These views are almost always pleasing, despite their ubiquity.

Here is another similar view, though at an entirely different location along the trail system.

I also enjoy the delicate textures created by contrasting elements on a much smaller scale, in this case a balsam branch fallen into the snow cover on the trail.

It would be neglectful, of course, not to illustrate the trail itself. This is a typical view.

This large granite boulder, left behind by retreating glaciers, remains a favourite landmark of Susan's and mine.

There are complex, fractal, infinitely complex textures overhead in addition to those layering the forest floor.

I am also drawn to simple images, though even a single birch against the snow is not as simple as it at first appears.

From simplicity to complexity... again. Note that the tongues of snow cover are clearly giving way to the resurgent forest.

Though following rules which remain fully submitted to randomness, the following image of a young grove of birch trees certainly offers the illusion of order and deliberateness.

I entered this image not for the composition of its visual elements, but for its almost flawless representation of the full palette of March, though the fresher tones of green are not so obvious here.

This naturally occurring arbour is just as intimate and nurturing in life as it appears in the image below.

Another image which captures the palette of March almost perfectly.

And here are some of the umbers and greens which were neglected in previous palette photos.

The trail itself, traversed by dogsled more than by motorized vehicle.

The bare forest against the sky.

Here is the perfect photo to close our review of the current March Palette series. The vapour trails of the technological world remind us that the sphere of the natural world is finite in scope. However, there is more to explore here near our home than we can exhaust in the time available to us. Wilderness, though often intersected by the marks and scratchings of men and machines, seems here still to stretch without end in every direction.

Thank you for joining me again for this review of the palette of Kenora (Northwest Ontario) in March 2009.

The Kenora palette series:

The Kenora March Palette: 2009

The Kenora Palette: After the June Rain

The Kenora May Palette Erupts into Green Tones, but also into Unexpected Hues

The Kenora Palette in May

The Kenora March Palette
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A Letter to a Friend

5 March 2009

I have mentioned before that this is a very busy time of year in my work schedule, so I have had little time to blog. However, I wrote a letter to a friend today that sums up my views of where and how to invest in 2009.

As I don't have much time to say more, I'll just print the letter below in its original form:

Well, I've been right about gold since 2003, when I began investing in that sector.

However, I was not expecting gold mining stocks to fall with everything else as they did last year. That was a big setback for us.

Gold has climbed from the $250 range to its present $900-1000 range during that period, and can easily go much higher.

The problem with the miners is that their production costs have been rising quite a lot, and they have to access large amounts of capital, so they are vulnerable to the credit freeze also.

That being said, gold stocks have well outperformed other sectors this year, and if gold keeps climbing, the gold stocks could do very well. For example, gold stocks outperformed during the great depression, even though gold ownership was outlawed.

The reason gold is a good investment is that governments around the world are literally printing money to bail out everything. That makes money worth less, and gold worth more. For example, at the turn of the millennium, there were about $4 trillion US dollars in circulation. That figure has now gone to $15 trillion. The US government now owes about $30 trillion, and it is more bankrupt than General Motors – only high inflation will make current government debts payable.

I follow an advisor named John Doody who identifies the gold stocks he thinks will do best. Some of the bigger names on his list are Goldcorp (their main mine is very near where we live), Royal Gold, Franco Nevada and Yamana Gold. Any of these will do well over the next several years.

An exploration company I like is called Rubicon Minerals, because it has good exploration finds in Red Lake, near our local Goldcorp Red Lake Mine, and the primary investor (Rob McEwen) has very deep pockets.

In the silver sector, Pan American Silver is the big name. Two companies with very large undeveloped silver deposits are Mines Management, which I mentioned to you earlier, and First Majestic. Silver usually lags gold in the early stages, as is occurring now, then overtakes and outperforms gold, as it is a smaller market.

For market analysis, I think the best overall newsletter is written by Pamela and Mary Ann Aden. Doody’s “Gold Stock Analyst” is the best gold mining advisory. For daily market analysis, look at Bill Fleckenstein. You can find any of these with a quick Google search. You have to pay several hundred dollars per year for these advisories. Fleckenstein is cheapest, and Doody most expensive.

As far as timing, the Adens describe four cycles in the gold price. The gold price is presently in what they consider a “modest” down cycle. This modest weakness is usually followed after a few weeks or a couple of months by gold’s strongest rise, which may run for several months. The question this year is whether gold goes to $1200 or $1300 or higher. My own bias is actually slightly higher - in the $1600 range, though I am thinking in terms of 2010 to see that kind of figure. That move will drive the gold stocks quite powerfully. After their (irrational) weakness last year, gold stocks should be this year’s best performing sector. The best time to buy would have been at the bottom in November 2008. However, the present period, including likely the next few weeks, should also be a good time to buy at lower prices.

I find timing the most difficult aspect of investing, and I don't think anybody is on top of how to do that. It’s always a guess as to when is the best time to buy or sell. However, it is possible – not certain – that gold stocks might do very well this year in particular.
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A Self-Repair Strategy for the Auto Sector

22 January 2009

When in doubt - question your assumptions.

Canada is presently facing an extensive debate about how to manage the looming bankruptcy of the North American Big Three Auto Makers.

The unquestioned assumption?

We're going to fix this by arranging for the government to throw taxpayer money at the problem.

Thus the debate is not really about whether to bail out the sector, but about how to bail it out.

In my view, this is exactly the wrong kind of thinking.

What is the problem?

In a collusive strategy of mutual self-reward, both executives and unions have been engaging in self-indulgent behaviour for decades.

Let's start with the executive side.

The unquestioned assumption is that executives are worthy of receiving high salaries, exorbitant benefit and stock option arrangements, and luxurious perks - let's not even start talking about the Lear Jets.

How about the unions?

In Canada, auto workers' wages are 50% higher than the average for assembly line workers in the industrial sector ($34 versus $22 per hour). Add in the benefits, and auto workers surge still further ahead. The rationalization is that the Canadian Auto Workers are "pushing the envelope" for Canada's other industrial workers.

The logic on both the executive and the union sides is entirely self-serving.

How about shareholders?

Exploited investors have paid for these failed strategies with at least a decade of declining stock performance. The markets discerned years ago that the North American auto sector was not a source of reliable profit increase - for exactly the reasons I have just described.

When the North American economy surged due to shared government and central bank policies of sustaining rather than short-circuiting a succession of debt-based financial bubbles, both the executives and the unions in the auto sector were able to exploit this illusory "blue sky" financial environment to "get away" with their bad behaviour. Investors - who have consistently been the first to be punished, particularly over the past decade - did not do well, but the companies stayed in business.

Now that the bubbles - save for the current taxpayer and central bank-funded "bailout bubble" - have popped, self-indulgence is no longer a viable business strategy.

Question your assumptions.

Hey, isn't competition in the automotive sector a good thing?

What is my proposal?

Leave the auto sector alone to sort out its own problems. Based on fundamental free market principles, let the executives and the unions decide together how much or how little they are willing to cut back - to live lives a little bit more like the rest of us. If they retrench sufficiently, maybe they can stay in business - and, if it has truly gone too far for too long, perhaps they can't. That is how free markets work.

If you have seen Francis Coppola's film, Tucker, then you know that in their heyday, the big three were not kind to competitors who wanted to build different kinds of cars.

What does a free market do? It engenders competition. If the big three can't compete, then some of their existing competitors very likely can - or alternatively, it is likely that in the event of actual dissolution of the big three, new automakers will arise in an uncluttered environment which permits renewed competition - perhaps out of such sectors as green energy, lightweight materials, aircraft technology, light vehicle manufacturing, etc.

Certainly the big three have failed in the mission of building "different kinds of cars." If the present market truly demands a different car - smaller, greener, lighter, more economical, alternative fuel-based, whatever - then a free market will generate solutions to fill the void that the big three have been unable to address.

Permit me to add another note, addressed to Canadians.

I do not know how well Canada's manufacturing sector will fare in the future. I do know that throwing government money at the sector will produce no lasting solutions - in fact, it is far more likely to perpetuate the existing culture of "self-indulgence all-around."

But Canada is a commodity-producing country. We live in a world where essentially all of Asia, much of the Middle East, enlarging sectors in Latin America, and even isolated parts of Africa, have joined the global consumer economy. It takes little prescience to appreciate that this reality will create an unprecedented international bull market in commodities, no matter how tough our present economic environment.

As it happens, Canada is the world's leader in the field of nurturing small capitalization mining ventures. Right now, while Canadians dither about the fate of our manufacturing sector, and to a lesser degree, our forestry sector, many small cap miners with excellent potential are facing dissolution or bankruptcy, while our larger mining companies are shutting mines, suspending exploration activities and shedding jobs.

Our eyes are fixed in the wrong place.

The Canadian economy has always surged when commodities are in demand, and contracted when they are not. The Canadian economic cycle is no mystery to anyone who has studied it.

The 21st century is therefore Canada's century.

Canada's mining and mineral sector is set to soar in response to the greatest commodity boom in human history (fuelled by 7 billion global citizens). And we have so far responded by dithering about how to save jobs in our sunset industries.

I assert modestly that Canada's commodity sector has the capacity to create ten jobs for every one that will be lost in manufacturing or in forestry. But Canadians do not see this because we are looking backwards, not forwards.

If subsidies are warranted, it is certainly not in the over-indulged automotive sector, but in our neglected crown jewel - the mining and mineral industry.

So I propose - also - that if we really just have to spend some of our taxpayers' hard-earned money, lets invest it in development loans for small mining companies and in training Canadians for employment in the soon-to-be booming mineral and mining sector.

Let's take off our blinders, and think in terms of real opportunity instead of in terms of rescue, salvage and "bail-outs."
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