Market Update

General - am I getting too bullish? - my favourite...

Good afternoon

so she did not do it! Thank you very much - for now - god knows, where this is ending! Markets are certainly pretty excited - nice little relieve-rally in anything, which moves: gold, metals, equities, bonds ( German yield below Zero again ), A$ name it...the wonders of liquidity....

New Home Sales in the States declined today.

An interesting theory from one of my more conspirative-theory-clients: Governments around the world have managed to reach the target to not pay any interest any more on to the next step: Spending to buy time, and buy the next election! And how do you do that? You spend on infrastructure....Certainly, this is what China is doing, what Clinton as well as this other lunatic are proposing to do with big $, what emerging countries are doing. And what do you need for this??? Steel steel steel...and iron ore and coal and nickel etc.....Is that what we are seeing?? Coking coal prices are up by 200% since early this year, thermal coal is up by nearly 50%, manganese up by 150% or so....Nobody believes, that these prices can stay up here - NOBODY has forecast even a 20% price increase for coke, not to talk about 200%, either! I do not believe, that they will stay up here, either - but in any case, it looks like the major producers will be in for major earnings surprises this year - and this will drag the small guys with them! 

The same can happen to oil, nickel, copper etc pp - at various times. But the  message is: You have to be set, BEFORE it starts....

Hardly anybody in the wider market has taken notice of the above mentioned, unbelievable prices for some of these commodities. Once they do, we will have a lot of money move to our sector.

And if this hope is not right? Well, we would have much less fun - but would be invested in one of the very few asset classes, which are still good value on a long term view! RIO and BHP have broken out, or are about to do so - the smaller sector will follow at some stage, and in a big way! These stocks have barely moved so far!

My absolute favourite in this scenario is little Panoramic - and I am sure that you guys are all sick & tired to hear this name! For 100 mill$ market cap, you get a stock which has never had more resources than today - and in fact, most probably has 15years+ in mine life at the right nickel price. As I said before - at a sustained nickel price of 12.000 US$ - and 16.000 A$ - which is only 15% higher than today, Savannah would be back in production at 11.000t of nickel p.a....if we go to 15.000 US$ or 20.000 A$/t, this mine could be generating 90 mill$ in operating cash flow p.a.!! Well - let´s not get too carried away, because the A$ would probably be up by 20% in such a scenario, costs would rise again etc pp....but this stock could well be capped at  1 bill$ in a crazy market...sounds completely crazy, but we have seen it before....And in the meantime, you should shortly see the details of the gold spin-off, which is planned to raise 15 Mill$, to be capped at 30 Mill$ at the IPO-price, while it should be worth at least 60 mill$, and perhaps 90 mill$ -which again does not sound outrageous for a 1 mill oz resource, with AISC of 1200 A$ or so, producing 70-80.000 oz p.a....As you can see, I am just so bullish on this stock - and I am putting my investors money, where my mouth is, having a 5% position of PAN in my fund...This is a quality stock, with an excellent MD, 30 Mill$ in cash, and it should be burried in your bottom draw!

So in case you are underweight resources, you should be buying a few BHP, RIO and S32, giving you exposure to all major commodities, and to some dividends...You should own a few Evolution as well for gold exposure, some AWE for oil/gas exposure...And then the fun begins: buy a few Panoramic, Prairie Mining, Paringa, West African, Highfield, Finders, Berkeley, Peak Resources, Strike,   and Sheffield - and you have a portfolio across all relevant commodities, split between major blue chips and developing companies. Or alternatively, you put some money into our Nestor Australian Fund, which has no BHP or RIO, but all the rest, and is approx 50% weighted in hedging, no futures, full currency exposure!

Crusader - doing a placement today....disappointing, but they have put the last one to good use....and in the current enviroment, Borborema as well as Juruena are valued just too low...refer yesterday´s email...

Have a nice weekend and enjoy the ultra-low interest enviroment, while it lasts!


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