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Musical ChairsMike Hoy We have entered what I feel to be, a very interesting time period in the precious metals and natural resource markets. Never have I seen so many companies reporting such excellent results from their work programs and getting absolutely no respect in the market. I attribute this to two basic reasons; (1) the market is limited in the supply of new capital available to invest in these stocks and (2) the potential buyers of these stocks have absolutely no motivation to bid them up. The opportunities are real but the supplies of available funds are strictly limited to what the players already have committed in the market. There is a big reluctance on the part of investors to commit new money as they are not at all pleased with the returns of their current investments. This is like playing musical chairs where the players are there but nobody is stepping up to the plate until they feel they absolutely have too. They are all going around in circles doing very little because of the poor returns, performance and lack of liquidity in what they already own; in short they have no desire or motivation. As a result of investors lack of funds or reluctance to commit new funds we are seeing the market eat itself up from within. We are seeing investors pruning their portfolios of, what they feel are the weak or undesirable stocks, in favor of the new stocks they want to own. The problem with this is the fact that the bids are lacking to give them the liquidity to sell without driving the price of the stocks down. This is giving the market, in whole, a downward spiral where the basic fundamentals for owning stocks are taking a back seat to the fact that many stocks are being sold strictly because they offer the owners liquidity in which to use to purchase these new ventures. In other words we are seeing investors part with their better quality stocks because those are the stocks that they are finding bids and liquidity in. The ironic part to this is the fact that this selling is keeping a lid on the stocks that should be going up. Leadership is terribly lacking in this market as stocks in general are not advancing in relation to the positive news that the companies are releasing. When companies are releasing news on drilling programs where the results are exceptional and the stocks barely make a sustainable move forward; I have to wonder what the trigger will be to change the lackadaisical nibbling buying habits of timid investors to the bold venturesome risk takers that will inevitably emerge at the end of this malaise. In the not-too-distant future, stocks will again begin to react to the positive news releases and investors will be very surprised at what they have missed out on. Kind of like being the only one without a chair when the music stops. Frustration and lack of faith are the predominant and guiding ingredients that are ruling the roost today. Some investors are tired, bored, frustrated or simply do not care. I feel sorry for these people because I feel they are missing one of the greatest opportunities to load up on stocks at prices they may never see again. As for me, I have identified several stocks that I want to take positions in and I am putting bids in below the current market price and building positions as shares come along. It is very difficult to buy size as you have to take what you can get; patience is definitely a virtue on some of these new positions. My big reward will be a significant rise in these stocks when the market does turn around. Likewise, I must be patient with the lack of bids in the stocks that I am looking to prune out of my portfolios; many of the stocks that I am looking to sell are stocks that I really don't want to sell but stocks that I feel will underperform the new stocks that I want to buy. If my thinking is correct I will be able to buy back my old positions, if I choose, with a lot more money thereby giving me a greater position in the end. This is a very important point in time as many investors have completely overlooked the terrific news and fundamentals in favor of the technicals and they are missing an opportunity to pick up some really good bargains. This is a time when knowledge and experience are your greatest weapons. Knowledge and experience will give you the courage to step up and say "I know what is going on in these companies and they should be bought not sold!" You will find that when the market sentiment turns that you will have made some very prudent and timely purchases. Like the game of musical chairs; when the music stops, those without a position will be left out of the game at a time when the returns on their investments will be the quickest and easiest they can hope to achieve. Most investors allow sentiment and emotion to make their investment decisions for them and this, in my opinion is the single greatest mistake that investors make. History tells us that the second greatest motivator is greed; fear is the first, and when stocks finish their slow downward "Death March" and begin rising again investors will again regain their confidence and begin to finally bid stocks up and the party will begin again. It is at this point in time that I will be smiling because I have been acquiring some nice positions which I think will pay off handsomely. I believe the greatest mistakes I will make will come in trying to pick the ultimate price to sell; buying these stocks at these levels is a no-brainer knowing when to sell will require patience and restraint because I believe stocks in these sectors will go much higher than even I can envision before it is all said and done! Mike Mike
Hoy 321gold Inc |
