Here are Doug Kass’ annual “20 Surprises.” But some of them shouldn’t be a surprise. For example:
14. U.S. dollar’s value falls by over 10% in 2008; Gold rises to over $1,000/oz.
15. The price of crude oil eclipses $135/barrel
What would be surprising about either of those?
The always hilarious Dave Barry sums up the economy for 2007 this way:
On the economic front, the dollar continued to lose value against all major foreign currencies and most brands of bathroom tissue. There was a major collapse in the credit market, caused by the fact that for most of this decade, every other radio commercial has been some guy selling mortgages to people who clearly should not have mortgages. (”No credit? No job? On death row? No problem!”) It got so bad that you couldn’t let your dog run loose because it would come home with a mortgage. The subprime mortgage fiasco resulted in huge stock market losses, and the executives responsible, under the harsh rules of Wall Street justice, were forced to accept lucrative retirement packages.
More from Thomas Tan:
I believe in the not too far distant future, Gold and mining companies will become another category of alternative investment. Similar to private equity and hedge funds, globalization and wealth in emerging markets will bring much higher demand for gold and mining companies across the world than in the 1970s.
From the supply side, we are facing a more severe scarcity of gold supplies than 1970s. Investing in the gold ETF fund GLD provides a convenient way to capture this potential 20% return in 2008, and investing in many major miners such as FCX, NEM, ABX I expect will gain a 40-50% return, as they usually double gold’s return. Investing in the right juniors can easily see your investment doubled, or invest in GDX to enjoy diversification of investing in both majors and juniors in one exchange traded fund.
Ten from Thomas Tan. I can’t disagree with any of them.
Michael Kahn on what looks good for 2008.
Richard Russell thinks that gold cleared an important hurdle on Wednesday.
Let’s say you think something extreme is going to happen with the economy. You’re just not sure what it will be, hyper inflation or deflation. So you want an investment that does well during periods of both extremes. The answer is gold.
It’s time to get back to work and it’s already Wednesday. For some reason I like all the new year forecasts. I don’t know why because they’re next to worthless. But for what it’s worth the average forecast for the S&P by the end of 2008 is 1637. So the only thing we no for sure is that the S&P won’t be 1637 on the last day of 2008.
From Resource Investor:
Silver Wheaton Corp. [NYSE:SLW] has signed a binding letter agreement to purchase between 45% and 90% of the life-of-mine silver to be produced by the Rosemont Copper Project, 100%-owned by Augusta Resource Corporation [AMEX:AZC; TSX:AZC].
Silver Wheaton will pay an upfront cash payment ranging in value from US$135 million to US$165 million to acquire 45% of the payable silver, or US$240 million to US$320 million to acquire 90% of the payable silver, produced for the life-of-mine.
The Rosemont Project is a copper-molybdenum-silver-gold porphyry deposit located in Pima County, Arizona. Based on a positive Feasibility Study released in August 2007, the Rosemont mine is expected to produce annually an average of 220 million pounds of copper, 4.5 million pounds of molybdenum, 2.7 million ounces of silver and 15,000 ounces of gold over the mine life, currently expected to be a minimum of 18 years.
Update: More on the deal:
This would indicate a cost for Silver Wheaton of between US$5.50 and $7.50 per ounce over 18 years depending on the final terms, compared with a current silver spot price of about $14 an ounce.
Augusta CEO Gil Clausen said the Silver Wheaton financing will cover 16 to 38 per cent of the project’s expected capital cost in return for only two to five per cent of total projected revenue.
For Silver Wheaton, the transaction “provides long-term growth potential … without project permitting or financing risk,” stated Silver Wheaton CEO Peter Barnes, adding that it provides “maximum upside to the silver price, and also eliminates the major operating risk in the industry today, being increasing operating and capital costs.”
I think the gold/xau ratio chart is the most important one in knowing when to buy mining stocks. Bob Moriarity apparantly thinks the same thing. He just prefers the inverse — the xau/gold chart:
I have referred many many times to my favorite chart. It is the best measure of pure psychology that I know. Lots of people believe that putting lines on charts will tell you when to buy. But no one I know has gotten rich that way. And others want you to believe that all you have to do is do fundamental analysis. But at tops there are 10,000 perfectly valid reasons to buy and at bottoms there are 10,000 perfectly valid reasons to sell.
People buy because of greed and they sell because of fear. They should do it the other way around. The simple chart of the XAU over gold measures both greed and fear. Everyone is terrified of buying right now as shown by the chart below. That means it’s time to buy… Correction’s over… Back in the pool. Gold shares are going to go much higher and there have only been two better times to buy in the last three years. Those are good odds.
